SEBI has made a series of changes to the rules on nomination and transmission of securities. These changes form part of its broader effort to improve the ease of doing business and the ease of doing investments in the securities market.
In simple terms, the changes seek to make the process easier when an investor dies and another person has to receive or deal with the securities held by that investor.
The issue is important because the death of an investor can create a difficult administrative process for the family. Shares, mutual fund units and other securities may continue to exist in the investor’s name, but the family or other entitled persons must complete certain formalities before the assets can move to the appropriate person.
SEBI’s recent measures seek to reduce uncertainty in this process. They also seek greater consistency among listed companies, registrars and transfer agents, depositories, depository participants and other intermediaries.
The expression “ease of doing business” in this context should therefore not be understood only as a benefit for companies or financial institutions. It also has a practical effect on investors, nominees and legal heirs because a simpler administrative process can reduce avoidable delay and repeated documentation.
What transmission means
Transmission is the process through which securities move after the death of a holder to the person who is legally entitled to receive them.
This is different from a normal sale or transfer. In a sale, the holder voluntarily transfers securities to another person. In a transmission case, the change in ownership or possession arises because of the death of the holder and the applicable succession process.
For example, if a person holds shares in a demat account and dies, those shares cannot simply remain in the deceased person’s name indefinitely. A process is required so that the securities can move to the appropriate person.
The precise documents and process can depend on the circumstances. The presence or absence of a nominee, the nature of the account, the value of the securities and the applicable succession documents can all matter.
SEBI’s July 23, 2026 circular seeks to simplify and standardise this framework.
Why standardisation matters
One of the practical problems in transmission cases has been that investors and their families may face different procedures across intermediaries.
SEBI’s framework seeks to reduce this uncertainty. The objective is to create a more consistent process for listed companies, registrars and transfer agents, depositories and other relevant intermediaries.
This has significance for both sides of the process.
For an investor’s family, clearer rules can make it easier to understand what has to be submitted and where it has to be submitted.
For intermediaries, standard procedures can reduce the need for case-by-case interpretation of routine transmission requests.
The July 23, 2026 SEBI circular specifically refers to the “simplification and standardisation of the framework for transmission of securities.”
| Area | Earlier practical concern | SEBI’s stated direction |
|---|---|---|
| Transmission | Different procedures could create uncertainty | Greater standardisation |
| Documentation | Families could face procedural friction | Simpler and clearer requirements |
| Nomination | The role of a nominee could create practical questions | A clearer framework for nomination and transmission |
| Nominee to legal heir | Additional procedural and tax-reporting issues could arise | A defined process and reporting mechanism |
| Letter of Confirmation | An additional step in certain processes | Removal in several cases |
| Credit of securities | Intermediate steps could add delay | Direct demat credit after required due diligence in applicable cases |
Changes to nomination
Nomination is intended to provide a mechanism through which an investor can identify a person or persons who may receive the securities after the investor’s death, subject to the applicable legal framework.
SEBI’s May 2026 changes provide that, for newly opened single-holder demat accounts and mutual fund folios, nomination is the default position, while the investor can opt out.
For jointly held accounts and folios, nomination is not mandatory under the stated framework.
SEBI has also permitted an investor to nominate up to three nominees.
These changes attempt to make nomination a more usable part of account and folio administration.
| Account or folio | Position under the May 2026 framework |
|---|---|
| Newly opened single-holder demat account | Nomination is the default, with an option to opt out |
| Newly opened single-holder mutual fund folio | Nomination is the default, with an option to opt out |
| Jointly held demat account or mutual fund folio | Nomination is not mandatory |
| Number of nominees | Up to three nominees |
The practical value of nomination is that it can give an intermediary a clear person or persons with whom it can begin the post-death process.
However, nomination should not automatically be treated as a complete statement of succession rights. The legal rights of heirs can depend on the applicable succession law, testamentary documents and other relevant facts.
Nominee and legal heir are not necessarily the same
This distinction is central to understanding the new framework.
A nominee is the person recorded for the purpose of nomination. A legal heir is a person who has a legal entitlement to the deceased person’s estate under the applicable law or succession arrangement.
These two roles can overlap, but they are not necessarily identical.
SEBI’s framework treats the nominee as a person who can receive the securities and, in the relevant circumstances, act as a trustee for the legal heirs.
Therefore, nomination should not be read as a rule that automatically decides the final beneficial ownership of the deceased investor’s estate in every case.
A simple example can explain the distinction.
Suppose A owns securities and names B as nominee. A later dies. The securities may be transmitted to B under the applicable SEBI process. If C and D are the persons legally entitled to A’s estate, B’s receipt of the securities does not, by itself, necessarily settle the ultimate succession rights of C and D.
The transmission process and the succession process are therefore related but distinct matters.
This distinction is legally important because securities law procedures do not necessarily replace the succession law applicable to the deceased person.
Nominee to legal heir process
SEBI has also addressed the process through which securities received by a nominee can move to the legal heirs.
This is relevant because the nominee may receive securities from the intermediary even where the nominee is not the final beneficial owner under the applicable succession arrangement.
SEBI introduced a mechanism for transmission from the nominee to the legal heir.
The framework also addresses a practical tax-reporting issue associated with this process. SEBI introduced the “TLH” or “Transmission to Legal Heirs” reporting reason code.
The purpose of such a code is administrative. It can help distinguish a transaction that represents transmission to legal heirs from an ordinary market transfer.
This distinction matters because a transmission arising from succession is legally different in character from a normal sale of securities.
Removal of the Letter of Confirmation
Another important change concerns the Letter of Confirmation, commonly referred to as an LOC.
SEBI has removed the requirement for issuing an LOC in several investor-service processes, including transmission.
The change took effect from April 2, 2026.
Instead of an intermediate Letter of Confirmation in the relevant cases, securities can be credited directly to the investor’s demat account after the required due diligence.
This can reduce one administrative step.
The change does not mean that due diligence disappears. The intermediary still has to follow the applicable verification and compliance requirements.
The important difference is that the process does not require the same intermediate document in cases covered by the revised framework.
| Earlier approach in relevant cases | Revised approach |
|---|---|
| Due process could include issuance of a Letter of Confirmation | LOC requirement removed in several investor-service processes |
| LOC could act as an intermediate step | Direct demat credit can take place after required due diligence |
| Additional administrative handling | Fewer procedural steps in applicable cases |
What “ease of doing business” means here
The phrase can sound like a corporate policy term, but its meaning is quite practical in this context.
Ease of doing business means that intermediaries should have clear and workable procedures through which they can process legitimate requests without unnecessary procedural complexity.
At the same time, ease of doing investments means that investors should not face avoidable difficulty in maintaining their investments or passing them through the relevant post-death process.
The two objectives overlap.
A standardised transmission process can reduce the number of situations where an intermediary has to interpret unclear or inconsistent requirements. It can also reduce the possibility that a family has to make repeated submissions merely because different entities follow different procedures.
The aim is therefore not to remove legal safeguards. Rather, the stated policy direction is to reduce avoidable administrative friction while retaining necessary verification.
Why this matters for families
The importance of these changes becomes clearer in a death-related situation.
A deceased investor’s family may already have to deal with a number of legal and financial matters. A complicated securities transmission process can add another layer of difficulty.
A clear nomination can give the intermediary a defined person with whom it can deal.
A standard transmission framework can provide greater clarity about the process.
The removal of an LOC in applicable cases can remove an additional administrative stage.
The TLH mechanism can also provide a clearer administrative route when securities move from a nominee to legal heirs.
These changes do not eliminate the need for legal documents in every case. They also do not guarantee that every transmission request will be completed immediately. Where there is a dispute about succession, inadequate documentation or another legal issue, additional steps may still be necessary.
The role of due diligence
An important point is that simplification does not mean automatic approval of every claim.
Financial intermediaries still have to establish the relevant facts and comply with applicable requirements.
SEBI’s move toward direct demat credit after the required due diligence should therefore be understood as a change in procedure, not as a removal of safeguards.
This is particularly important because securities can have substantial financial value. A system that makes transmission easier must still protect against an incorrect claim, fraud or an improper transfer.
The balance sought by the framework is therefore relatively simple: less unnecessary process, but sufficient verification before securities move.
What investors should understand
For investors, the practical lesson is that nomination remains an important part of account planning.
A single-holder investor can review whether a nominee is recorded and whether the details remain accurate. Where the framework permits multiple nominees, the investor can consider whether that facility suits their circumstances.
However, nomination should not be treated as a substitute for proper estate planning.
Where an investor has a will, family arrangement or other succession plan, the nomination details and the broader estate plan should be considered together. Where substantial assets or complex family circumstances are involved, professional legal advice may be appropriate.
The exact consequences can depend on the applicable succession law and the facts of the particular case.
A broader regulatory objective
SEBI’s recent measures reflect a wider regulatory effort to make investor-service processes more uniform.
The underlying issue is not only speed. Standardisation can also improve predictability.
For intermediaries, a common framework can reduce uncertainty about how routine cases should be handled.
For investors and their families, greater predictability can make the process easier to understand.
For the market, a clearer process can also reduce the risk that securities remain unclaimed simply because the family is unable to complete an unnecessarily complex administrative procedure.
SEBI has specifically linked nomination with faster settlement of claims and with efforts to prevent securities from becoming unclaimed assets.
What the changes do not mean
The changes should not be interpreted as saying that every nominee automatically becomes the final owner of the deceased investor’s securities.
They should also not be interpreted as saying that all transmission cases will require the same documents.
The applicable process can vary according to the facts. A case with a valid nominee can differ from one without a nominee. A joint holding can differ from a single holding. A straightforward succession case can differ from a case where heirs disagree or where additional legal documentation is required.
The reforms therefore simplify the framework, but they do not remove the need to examine the individual case.
Conclusion
SEBI’s changes to nomination and transmission can be understood as an effort to make the post-death handling of securities more predictable and less burdensome.
The May 2026 nomination changes provide for nomination as the default for newly opened single-holder demat accounts and mutual fund folios, with an option to opt out. They also allow up to three nominees, while nomination remains non-mandatory for jointly held accounts and folios.
The July 23, 2026 transmission circular seeks to simplify and standardise the transmission framework.
The removal of the Letter of Confirmation requirement in several investor-service processes, effective from April 2, 2026, can remove an intermediate administrative step. The introduction of the TLH reporting reason code also provides a defined administrative mechanism for transmission to legal heirs.
Taken together, these measures show what “ease of doing business” means in this particular regulatory setting. It is largely about clearer rules, fewer unnecessary procedural steps, greater standardisation and a more predictable process, while retaining the due diligence required before securities move.
For investors, the practical significance is equally important. A properly recorded nomination can make the first stage of a post-death claim more straightforward. But nomination, transmission and succession are not identical concepts. The final rights of legal heirs can still depend on the applicable law and the facts of the case.
The safest way to view the reforms is therefore not as a removal of legal requirements, but as an attempt to make the existing securities administration system simpler without removing the safeguards that protect ownership and succession rights.
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