SEBI Updates: Circular on Investor Grievance Redressal Mechanism

In order to make investor grievance redressal mechanism at Stock Exchanges more effective, Securities and Exchange Board of India (“SEBI”) has decided to shorten the time taken for the proceedings as well as to give monetary relief to the investors. Further, it has been decided to provide monetary relief to the investor. Vide circular dated October 28, 2004, SEBI had notified Comprehensive guidelines for Investor Protection Fund/ Customer Protection Fund at Stock Exchanges. Further, other two circulars, dated August 11, 2010 and January 20, 2010, had notified Arbitration Mechanism and Investor Grievance Redressal Mechanism respectively. The latest circular [favourable to investors], dated September 26, 2013 has the following important features:

         

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Ø  ØStock Exchanges shall ensure that all complaints are resolved at their end within 15 days. The correspondence with the Member & investor (who is client of a Member) may be done on email.

Ø  ØWhere the matter is not resolved, the conciliation process will start. The Investor Grievance Redressal Committee (IGRC), while resolving the dispute amicably, should adopt a two-fold approach: (i) Consumer Related Complaints - Direction to the Member to render required service; (ii) Trade Related Complaints - an order concluding admissibility of the complaint or otherwise.

Ø  Where conciliation fails, Stock Exchanges shall block the admissible claim value from the deposit of the Member. The blocked amount will be to the investor if the Member does not opt for arbitration.

Ø  Where, the Member opts for arbitration, and the claim value admissible to the investor is not more than 10 lac, then (i) 50% of the value or .75 lac, whichever is less, will be released to the investor; (ii) where arbitration award favours the investor and member opts for appellate arbitration, a positive difference of 50% of the amount (mentioned) or 1.5 lac , whichever is less, shall be released to the investor; (iii) Where the member makes an application under Section 34 of Arbitration Act (1996) for setting aside the appellate arbitration award, 75% of the amount determined in the appellate arbitration award or Rs. 2 lac shall be released to the investor

Ø  To ensure that the investors do not misuse the provisions of the circular, actions can be taken against them, for example, disqualification by the Stock Exchange. Where the investor loses at any stage of proceedings and decides not to pursue further, and further fails to refund the amount released from IPF, the investor will be restricted to trade on any of the Stock Exchanges.

Ø  The total amount released to the investor from Investor Protection Fund (“IPF”) should not exceed Rs. 5 lac in one financial year.

Ø  Time limit for acting against ‘Arbitral Award’: The Member will one month to file an application for appellate arbitration and three months to make an application under Section 34(3) of the Arbitration Act (1996).

For downloading the circular, click here.