- What happens after the death of a Mutual Fund investor?
- Whose right to his money?
- What do SEBI rules say?
Mutual Fund Transmission SEBI Rules: Are you investing in mutual funds or does anyone in your family invest in mutual funds” Fund (Transmission SEBI Rules)
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What is the new rule of SEBI?
Earlier, claims were rejected for minor and trivial mistakes of the nominee. There was also a fixed time limit for filing claims. However, now a new framework has been released as per SEBI's new mutual fund transfer rules, making the process much easier than before. This new rule is divided into three categories, and each category has different rules. Let's know the exact rules one by one.
Chapter 1: Joint Holding
If a couple, i.e. husband and wife, invest jointly in a mutual fund, it is considered as joint investment. In such cases, if one of the holders dies, the process for the surviving spouse is very simple. As per the new rules, AMCs are now not required to repeatedly request documents like KYC, indemnity bond or undertaking from the surviving joint holder. Only the death certificate of the deceased will transfer the entire account to the other holder.
CHAPTER 2: SINGLE HOLDER AND NOMINEE REGISTERED
If the mutual fund is in the name of only one person, but the nominee's name is already mentioned on the documents, the nominee can submit a transfer request to the AMC or RTA. This requires submission of a transfer request form, a verifiable death certificate and an account statement of holdings. It is important to note that being a nominee does not mean that person becomes the legal owner of the fund. As per SEBI's new framework, the nominee receives the property as a trustee on behalf of the legal heirs of the deceased investor. The transfer of units by the AMC to the nominee fulfills the responsibility of the AMC, but the true owner is determined under the Succession Act.
Chapter 3: Non-registration of Single Holder and Nominee Registered
This is the most complicated case. The investor has not provided any information about the nominee. Who will get the money? Spouse, children or parents are very difficult to decide. In such cases, the claimant has to prove that they are the legal heirs of the deceased. SEBI has established different routes for this depending on the claim amount:
Small Claims (up to ₹10,000 – for SOA mode): The 'Quick Transmission Processing' (QTP) route is for immediate relatives, parents, spouses, children. This requires transfer-cum-warranty, death certificate and proof of relationship.
Claims between ₹10,000 to ₹10 lakh: This falls under the “Simplified Documentation” category. A notarized indemnity bond and a notarized affidavit/no objection certificate from the legal heirs may be required along with the basic documents.
Claims above ₹10 lakhs: Stronger documents, such as an indemnity bond accompanying the will, a certificate of legal succession or a succession certificate, may be required. Fortunately, probate of a will is not mandatory in every case.
Note: If mutual fund units are held in demat account, these limits change. QTP limit for demat accounts is up to ₹30,000 and easy document limit is up to ₹30 lakh.
What other big changes have happened?
Death Certificate: Now, there is no need to carry the original certificate everywhere. SEBI has also accepted verifiable death certificates with QR codes.
Time Limit: After receiving all the required documents, the AMC must process the transmission claim within 21 calendar days. Any delay or denial of a claim must be explained in writing.
Acknowledgment: Upon submission of a claim, the processing organization must promptly acknowledge and disclose any discrepancies at the outset.
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