SEBI Examining Alternate Dispute Resolution Mechanism for Regulated Entities and Clients
Moneylife Digital Team 17 January 2022
Market regulator Securities and Exchange Board of India (SEBI) says it is examining the possibility of introducing alternate dispute resolution (ADR) mechanism in various agreements between the regulated entities and their clients. “This is with a view to providing an efficacious mechanism for resolving disputes between the investors and the regulated entities,” the regulator says.
SEBI has developed a separate investor charter for each category of market intermediaries. The regulator consulted registered intermediaries and regulated entities (REs), including stockbrokers, depository participants, asset management companies, registrar & transfer agents (RTAs), investment advisers, research analysts and merchant bankers. Stock exchanges, depositories and various intermediaries have published the respective charters on their websites. 
These charters contain information related to details of various services provided by the intermediaries to investors, their timelines, the importance of preservation of relevant documents by the investors and investor grievance redressal mechanism. These charters are expected to help investors improve their ease of investing in the Indian securities market, the regulator says.
SEBI says that if it receives a large number of repeated complaints on any issue, the root causes are analysed and appropriate policy changes are made to address the issue. After conducting such an analysis, some of the recent policy initiatives taken by SEBI include amendments about investor protection fund (IPF), investor service fund (ISF), and its related matters to expand the scope of dispute resolution. 
SEBI also standardised and simplified norms for processing investor services requests by the RTAs besides introducing common norms for registering or changing details like permanent account number (PAN), know-your-customer (KYC) nominee and also for other services involving securities certificate. 
After consulation with market players, SEBI said it has been providing an electronic interface for processing investors' queries, complaints and service requests by RTAs. All holders of physical securities in listed companies are now required to mandatorily furnish their PAN, KYC details, including bank account details, to preempt grievance about non-receipt of payments and intimation or notification from the company. 
All holders of physical securities in listed companies are now required to mandatorily furnish their nomination or file declaration to opt-out to preempt grievance about transmission, SEBI says. 
As of 31 December 2021, SEBI Complaints Redress System (SCORES) platform has more than 3,135 complaints pending, with as many as 36 complaints pending for more than three months (90 days). This is against the average resolution time of 35 days to resolve complaints on the SCORES platform. The highest number of complaints pending since the past three months is against stockbrokers at 23, followed by investment advisers at six. Three complaints each are pending against refund, allotment, dividend, transfer, bonus, rights, redemption and interest, and venture capital fund. There is a single complaint pending in the research analyst category.
Sunness Capital India Pvt Ltd has 23 complaints pending against its name in the stockbroker category. In comparison, CIG Realty Fund has all three complaints pending for the past 90 days in the venture capital category. Karvy Investment Advisory Services Ltd has two complaints pending over the past three months in the investment advisor category as of December 2021, data from SCORES shows.
While the entity is directly responsible for the redressal of investor complaints, SEBI says it can initiate action against recalcitrant entities, including registered intermediaries and listed companies, on the grounds of their failure to redress investor complaints.
For listed companies, SEBI has empowered stock exchanges to levy fines for non-redressal of investor complaints in terms of the relevant provisions of SEBI (Listing and Disclosure Requirements) Regulations, 2015 to be read with SEBI circular  SEBI/HO/CFD/CMD/CIR/P/2018/77 dated 3 May 2018.
“If the complaint is not redressed or fine is not paid, the stock exchanges can direct the depositories to freeze the entire shareholding of the promoter and promoter group in such entity as well as all other securities held in the demat account of the promoter and promoter group. If non-compliance continues, the stock exchanges may refer such cases to SEBI for enforcement actions, if any,” the market regulator says.
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