The Securities and Exchange Board of India (“SEBI”) had implemented an online platform, SEBI Complaints Redress System (“SCORES”) to help investors to lodge their complaints, pertaining to securities market, against listed companies and SEBI registered intermediaries. On August 13, 2020, SEBI, vide circular no. SEBI/HO/OIAE/IGRD/CIR/P/2020/152 detailed the procedure for handling complaints by the stock exchanges as well as standard operating procedure for actions to be taken against listed companies for failure to redress investor grievances (Read more, here.) 

The SEBI, vide circular no. SEBI/HO/MRD1/ICC1/CIR/P/2022/94 dated July 4, 2022 (“Circular”), has directed all recognized stock exchanges including commodity derivatives exchanges/ depositories to design and implement an online web based complaints redressal systems of their own, which will facilitate investors to file and escalate complaints for redressal through the Grievance Redressal Committee (“GRC”), arbitration, appellate arbitration etc. in accordance with their respective byelaws, rules and regulations. The circular mandates that the redressal mechanism shall be implemented within 6 months from the issuance of the circular. The SEBI has further advised all recognized stock exchanges including commodity derivatives exchanges/ depositories to widely publicize its online web-based complaints redressal system. It is also pertinent to note that SEBI vide its circular bearing reference no. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/76 dated May 30, 2022, had brought out a standard operating procedure for dispute resolution under the Stock Exchange arbitration mechanism for disputes between a listed company and/ or Registrars to an Issue and Share Transfer Agents (RTAs) and its shareholder(s)/ investor(s) which has come into force from June 1, 2022. (Read more, here).

The intention behind this move is four-fold:

1. Expedite redressal/ disposal of investors’ complaints; 

2. Obviate the need for physical movement of complaints;

3. Avoid the possibility of loss, damage, or misdirection of the physical complaints; and

4. Facilitate easy retrieval and tracking of complaints at any time.

According to the circular, the above-mentioned redressal system should be web enabled and provide online access around-the-clock with the following features:

1. Complaints/ GRC/ arbitration/ appellate arbitration and reminders thereon can be lodged online at anytime from anywhere.

2. An email is generated instantaneously acknowledging the receipt of the complaint and allotting a unique registration number for future reference and tracking.

3. The matter/ case moves online to the entity (intermediary or listed company) concerned for its redressal.

4. The entity concerned can indicate the mode i.e., online or offline, for GRC and arbitration.

5. The access of the online system should be given to the trading members and depository participants.

6. The entity concerned uploads an Action Taken Report (“ATR”) on the complaints/ GRC/ arbitration/ appellate arbitration.

7. All recognized stock exchanges including commodity derivatives exchanges/ depositories can peruse the ATR and dispose of the complaints/ GRC/ arbitration/ appellate arbitration if it is satisfied that the complaint has been redressed adequately.

8. The concerned investor can view the status of the complaint online.

9. The entity concerned and the concerned investor can seek and provide clarifications online to each other.

10. The life cycle of a complaint/ GRC/ arbitration/ appellate arbitration has an audit trail.

11. All the complaints/ GRC/ arbitration/ appellate arbitration are saved in a central database which would generate relevant Management Information System (“MIS”) reports to enable all recognized stock exchanges including commodity derivatives exchanges/ depositories to take appropriate policy decisions and or remedial actions.

12. There should be a provision to link the online system with SCORES.

Further, considering that the online process of GRC and arbitration/appellate arbitration, which was resorted to during the pandemic, saves time and cost of the parties involved, the circular mandates that the Stock Exchanges shall continue with the hybrid mode (i.e., online and offline) of conducting GRC and arbitration /appellate arbitration process.

The circular also amends SEBI Circular no. SEBI/HO/DMS/CIR/P/2017/15 dated February 23, 2017, whereby Clause 1.J.(iii)of circular stands replaced as:

“(iii) A client, who has a claim/ counter claim up to Rs.20 lakh (Rs. Twenty lakh) and files arbitration reference, will be exempted from payment of the fees specified in Clause 1.J.(i).”

Please find a copy of the Circular, here.

This update has been contributed by Prashanth Sabeshan (Partner) and Neena Varghese (Associate).

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