Add nominee to demat account or opt out by March 31

Mumbai: Retail investors will not be able to buy or sell shares from Friday unless they make the nominee updation, or declare opting out of making a nomination, in their trading and demat accounts.

The last date for updating nominations for trading and demat accounts is March 31, and trading accounts of investors not meeting the deadline will become inactive, as per regulations notified by market watchdog Securities and Exchange Board of India (Sebi).

According to brokers, more than half of their retail clients are yet to comply with the norms.

"Overall compliance in a nominee is still less," said Prakarsh Gagdani, CEO of 5Paisa Capital. "Communicating with clients, getting them to e-sign after completing the process, even if they want to opt out, is taking a bit longer," he said, hinting that the deadline should be extended.

"Though the objective of adding a nominee is good but stopping trading is not the right way to do it as it will create confusion on April 1 for many traders," Gagdani said.

Earlier, the date to comply with this rule was March 31, 2022. However, Sebi, in a circular dated February 24, 2022, had extended this deadline by one year to March 31, 2023.

Existing investors who have not submitted nomination details and intend to submit their nomination or opt out of nomination will be allowed to do so by way of two-factor authentication login on trading platforms of stockbrokers or depository participants.

According to the Sebi circular, no witnesses will be required for filing the nomination for the trading and demat account, whether the form is physically signed by the account holder or filed online using the e-sign facility.

"Many small and retail investors would get impacted unless the date is extended," said Gurpreet Sidana, chief operating officer of Religare Broking. "We are trying our best to reach out to all our important clients to comply with the Sebi norms before the deadline."

Though adding nominees differs for demat and trading accounts, many brokers are updating demat nominations into the trading account.

A CEO of a leading broking firm said not even 50% of small investors had updated their nominees or opted out of making a nomination in their trading account. "In case exchanges do not extend the deadlines, brokers will have to stop accepting orders from those non-compliant clients two days earlier as brokers will need to sell the shares on March 31 for those bought on March 29," the person said.

Even mutual fund investors cannot redeem their units from April 1 if they do not comply with the nomination process. Sebi has mandated the submission of nomination details or declaration for opting out of a nomination for investors opening new demat accounts on or after October 1, 2021.