With the deadline for submitting nomination details for demat accounts approaching, many stock brokers have been found to be updating the nomination field as ‘opting out’ without the consent of the investor.
India’s largest depository, National Securities Depository Limited (NSDL), warned such market participants through a circular issued on Monday.
NSDL, which handles demat securities worth over Rs 300 trillion, has explicitly asked participants to not update the choice of nomination on their own.
It can be updated by the brokers only after obtaining investors’ explicit consent, said the depository.
“It may be noted that updating the ‘choice of nomination’ without the explicit consent of the investor is against the intention of the circulars and the same has been viewed seriously,” said NSDL.
With just a few days to go, some stock brokers were found to be opting out from nomination on behalf of investors who hadn't updated or submitted the choice of nomination.
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According to the directions by the Securities and Exchange Board of India (Sebi), the trading accounts of the investors not meeting the nomination deadline will become inactive after March 31.
As the update has been mandated by the market regulator, stock brokers cannot charge for updating nomination or opting out.
Further, the circular has clarified that existing investors who had already provided the nominee details prior to Sebi’s circular need not re-submit nomination details. It has been kept optional for such investors.
Market participants have been advised to send a communication to their existing clients and investors who have not yet opted for nomination to submit a declaration.
