SEBI publishes Consultation Paper on strengthening the Investor Grievance Redressal Mechanism

Securities and Exchange Board of India (SEBI) on 21st December, 2022 has issues a press circular vide notification no. PR No.: 39/2022 and has publishes Consultation Paper on strengthening the Investor Grievance Redressal Mechanism in the Indian Securities Market by harnessing Online Dispute Resolution mechanisms

Present Scenario:

In case an investor has a grievance, she may lodge a complaint with the concerned intermediary, Market Infrastructure Institution (MII) or SCORES, for resolution. If the investor is not satisfied with the resolution she may opt for MII administered mediation and/or arbitration for resolution of the complaint, for specific intermediaries.

Key Highlights:

In order to streamline and strengthen the mediation and arbitration process in the Indian Securities Market, the following proposals are being considered:

  • Strengthening the existing MIIs administered mediation and arbitration mechanism, by making these processes more accessible and effective:
  1. By suggesting that these processes are conducted online on an end-toend basis using the capacity, technology, and other assistance of online dispute resolution institutions;
  • By modifying these processes for the benefit of the investor.
  • Extending the MIIs administered mediation and arbitration mechanism as modified above for resolution of investor/client grievances in respect of all specified securities market intermediaries. This will make the grievance redressal process more simplified, streamlined and efficient for the investors.
  • The proposed modifications in the existing MIIs administered mediation/conciliation and arbitration mechanism include relabelling the IGRC process as mediation/ conciliation, providing for a sole mediator/ conciliator/ arbitrator irrespective of the amount of the dispute, and doing away with appellate arbitration. Suggestions for various ways in which these grievance redressal mechanisms can be funded are also sought.
  • At the outset, it should be mentioned that the Indian stock market, comprising various constituents such as the stock and commodity exchanges, depositories, stock brokers, depository participants, have effectively and efficaciously dealt with investor grievances and disputes through the following measures:

a. Time-bound mechanism for resolution of investor complaints by the concerned intermediary,

b. In the event of complainant not being satisfied by the resolution, reference to mediation and conciliation undertaken by the Investor Grievance Redressal Committee – IGRC – as constituted by the stock exchange, and doing so in a time-bound manner, and

c. In the event of the IGRC process failing to resolve the matter, reference is made to the arbitration mechanism of the stock exchange, which resolves and decides the matter in a time bound manner.

  • Issues sought to be addressed by the proposed measures or which may arise in respect of the proposed measures

Hybrid approach (mix of online and offline) or Online only approach: As such, in case of MII administered online mediation/conciliation and online arbitration, online access to the parties including the investors, is expected to provide both time and cost savings to the parties, and not inconvenience them in having to travel or be at any specific location for the dispute resolution process. However, it may be useful to specify availability of a hybrid option, which serves to address any concern of digital divide including lack of access to suitable devices for initiating such proceedings, low internet speed, low digital literacy, etc. Therefore, while online resolution of disputes will be the default option, investors will have an option to participate physically in case they are not comfortable with online proceedings.

It is envisaged that in such a hybrid option the investors will be able to participate in the online mediation/conciliation and online arbitration process utilizing arrangements made or facilities available at designated MII offices/ Investor Service Centers (ISCs) across the country to effectively participate in or to initiate such online processes. The party insisting on physical arbitration however will not be able to insist that the other parties or mediators/ conciliators/ arbitrators also be present physically for the process. The intermediaries and the mediators/conciliators and arbitrators can participate in such processes online from their respective offices/locations. This will ensure that the new process is at least as accessible as the existing process of resolution.

Due date: The last date for submission of public comments is January 09, 2023.

View Full Consultation paper on strengthening the Investor Grievance Redressal Mechanism in the Indian Securities Market by harnessing Online Dispute Resolution mechanisms

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