Markets regulator Sebi on Thursday announced the deferment of the third phase of its nomination framework for the securities market, which was earlier scheduled to take effect on December 15.

The new implementation date will be announced later, the Securities and Exchange Board of India said in its circular.

The deferment comes in response to operational challenges faced by depositories and other stakeholders.

In January, Sebi issued guidelines to revamp the nomination process for mutual fund folios and demat accounts to enhance transparency and minimise unclaimed assets in the securities market.

Following representations from various industry bodies, the regulator decided to adopt a phased implementation approach through a subsequent circular in February 2025.

However, depositories, depository participants, and industry bodies have again expressed operational challenges and requested more time to update their systems and processes.

"In view of the foregoing, it has been decided to defer the timeline for implementing the aforesaid circular from 15 December, 2025, to a further date to be notified separately," Sebi said.

Under the circular, if one or more joint account holders pass away, the assets will be transferred to the surviving holder or holders without the need for additional KYC unless it was requested earlier and not provided.

The guidelines are addressed to entities like AMCs, depositories, and other market participants and introduce significant changes to the rule of survivorship, mandatory nomination for single holdings, and enhanced safeguards for authenticity.

Under the rule of survivorship, assets in joint accounts will be transferred to surviving holders without affecting prior nominations or operational modes.

The market watchdog also introduced robust measures to verify and validate nominations.

Sebi highlighted new rules allowing investors to nominate up to 10 persons in the account or folio, with an option to specify percentage allocations for each.

In the absence of any such specification, assets will be equally distributed among all nominees. In case of the demise of the investor and any one of the nominees, regulated entities will distribute the assets on a pro rata basis to the remaining nominees.

The regulator clarified that nominees will receive the assets as trustees on behalf of the legal heirs of the account holder, with no direct inheritance rights for the heirs of a predeceased nominee.

One of the key features of the revamped system is the inclusion of digital and physical channels for submitting or updating nominations.