The Securities and Exchange Board of India (SEBI) has issued a new circular aimed at enhancing investor awareness and protection in the securities market. This circular, SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/63, dated May 29, 2024, introduces significant modifications to the existing Investor Charter for Stock Exchanges. The updated charter incorporates new mechanisms such as the Online Dispute Resolution (ODR) platform and the upgraded SCORES 2.0 system, which aim to streamline and improve the grievance redressal process for investors. This article delves into the key aspects of the revised Investor Charter, highlighting the services provided to investors, their rights and responsibilities, and the procedures for handling grievances.
Detailed Analysis
1. Vision and Mission for Investors
SEBI’s vision is to offer a secure, transparent, and reliable marketplace for investors, ensuring high standards of integrity and service. The mission emphasizes providing accurate information, investor education, and protection while maintaining a trustworthy platform for investment across various asset classes.
2. Business Transactions with Investors
Stock exchanges facilitate investor participation across multiple asset classes including equities, commodities, derivatives, debt, mutual funds, and government securities. Detailed information on these products is available on the respective websites of the stock exchanges.
3. Services Provided to Investors
Exchanges offer a range of services both electronically and through dedicated Investor Service Centers (ISCs). These services aim to enhance investor convenience and include electronic transaction platforms and physical service centers for support and information.
4. Grievance Redressal Mechanism
Filing Complaints
Investors can file complaints via several channels:
- SCORES 2.0: A centralized web-based grievance redressal system.
- Stock Exchange Portals: Dedicated web portals for complaints.
- Email: Direct communication to designated email addresses of the exchanges.
- SMARTODR: An online platform for dispute resolution through conciliation and arbitration.
Process Flow
Complaints are initially reviewed by the exchange and can be escalated to SEBI if unresolved. The ODR platform provides a structured process for resolving disputes, including conciliation and arbitration, with specific timelines to ensure timely resolution.
5. Investor Rights and Obligations Rights
Investors are entitled to several rights, including:
- Access to KYC documents.
- Allocation of Unique Client Code (UCC).
- Best price execution for trades.
- Timely receipt of funds and securities.
- Transparency in transaction charges and fees.
- Participation in corporate benefits and timely services from companies.
Obligations
Investors have responsibilities such as:
- Dealing only with SEBI-registered entities.
- Providing accurate KYC information.
- Regularly monitoring account statements.
- Appointing nominees to facilitate asset transfer.
6. Special Circumstances: Broker Defaults
In the event of a broker’s default, exchanges follow specific procedures to protect investors, including:
- Public dissemination of default information.
- Inviting claims from affected investors.
- Providing necessary forms and assistance for claim filing.
- Detailed timelines and processes for claim resolution and reviews.
7. Dos and Don’ts for Investors
SEBI provides comprehensive guidelines on best practices for investing and grievance redressal to help investors make informed decisions and avoid common pitfalls.
8. Code of Conduct for Stock Exchanges
The code mandates exchanges to uphold legal and regulatory standards, ensure investor protection, promote best practices, and avoid conflicts of interest. Exchanges must also ensure their employees’ conduct aligns with these principles.
Conclusion
The revised Investor Charter by SEBI is a significant step towards enhancing investor protection and transparency in the securities market. By incorporating new dispute resolution mechanisms and clearly outlining investor rights and responsibilities, SEBI aims to build greater trust and confidence among market participants. Stock exchanges are now tasked with implementing these changes and ensuring that investors are well-informed and adequately protected. This initiative underscores SEBI’s commitment to fostering a robust and equitable investment environment in India.
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Securities and Exchange Board of India
Circular No. SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/63 Dated: May 29, 2024
All Recognised Stock Exchanges
Sir / Madam,
Subject: Investor Charter for Stock Exchanges
1. In order to facilitate investor awareness about various activities such as business transacted and services provided to investors on stock exchanges, grievance redressal mechanism, rights and obligations of investors, guidance pertaining to special circumstances related to market activities due to default of brokers, advisory for investors etc., SEBI in November 2021 has formulated the Investor Charter for Stock exchanges containing the information for investors on aforesaid issues and advised Stock Exchanges to disclose the same on their respective websites.
2. In view of the recent developments in the securities market including introduction of Online Dispute Resolution (ODR) platform and SCORES 2.0, it is felt necessary to modify the Investor Charter for Stock Exchanges inter-alia detailing the services provided to Investors, Rights of Investors, various activities of stock exchanges with timelines, Dos and DON’T’s for Investors, Responsibilities of Investors, Code of Conduct for Stock Exchanges and Grievance Redressal Mechanism which is placed at Annexure A.
3. In this regard, Stock Exchanges are advised to disclose the Investor Charter on their respective websites.
4. The circular shall be effective from the date of issuance.
5. All Recognised Stock Exchanges are advised to:
5.1. take steps to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of this circular; and
5.2. communicate to SEBI, the status of the implementation of the provisions of this circular in the Monthly Development Report.
6. This Circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
7. The Circular is issued with the approval of the competent authority.
8. This circular is available on SEBI website sebi.gov.in under the categories “Legal Circulars”.
Yours faithfully,
Vishal Shukla
General Manager
Market Regulation Department
Policy and Development 2
vishals@sebi.gov.in
Phone No.: 022-26449959
Annexure – A
Investor’s Charter-Stock Exchanges
1. Vision statement for Investors
Mission
- To provide transparent, equitable and reliable markets with timely and accurate information dissemination for investors.
- To provide the highest standards of investor education, investor awareness and investor protection and timely services.
Vision
To provide a safe, equitable, transparent, and trusted platform for investors to participate across asset classes with highest standards of integrity for investors.
2. Business transacted by the Exchange with investors:
The Exchange facilitates various products for investors to participate across asset classes viz Equity, Commodities, Derivatives, Debt, Mutual Funds, Government securities etc. Details available on the link [link provided by stock exchanges].
3. Services provided by the Exchanges to investors:
Exchange provides various services to investors electronically through its online platform and physically through the dedicated common Investor Service Centers (ISC) set for this purpose. Details available on the link [link provided by stock exchanges]
4. Grievance redressal mechanism:
(1) Mode of filing the complaints – Complaints can be lodged on the Exchange in the following ways:
(i) Through SCORES 2.0 (a web based centralized grievance redressal system of SEBI) [https://scores.sebi.gov.in]
Two Level Review:
a. First review done by Exchange
b. Second review done by SEBI
(ii) Respective Exchange’s web portal dedicated for the filing of compliant [link to be provided by Exchange]
(iii) Emails to designated email IDs of Exchange [link to be provided by Exchange]
(iv) Through SMARTODR (https://smartodr.in/login) dedicated for the filing of complaint.
(2) Regarding documents required for complaint resolution, please refer to link [link provided by stock exchanges].
(3) Process flow for Complaint Resolution Process through Scores 2.0
<<refer to Schedule III of the SEBI Circular dated September 20, 2023>>
Online Dispute Resolution (ODR)
|
1. |
Online Dispute Resolution (ODR) platform for online Conciliation and Arbitration | If the Investor is not satisfied with the resolution provided by the Market Participants, then the Investor has the option to file the complaint/ grievance on SMARTODR platform for its resolution through online conciliation or arbitration. [SMARTODR] |
| 2. | Steps to be followed in ODR for Review, Conciliation and Arbitration |
> Investor to approach Market Participant for redressal of complaint
> If investor is not satisfied with response of Market Participant, he/she has either of the following 2 options: May escalate the complaint on SEBI May also file a complaint on SMARTODR portal for its resolution through online > Upon receipt of complaint on SMARTODR portal, the relevant MII will review the matter and endeavour to resolve the matter > If the matter could not be amicably resolved, then to the matter shall be referred for conciliation. > During the conciliation process, the conciliator will endeavour for amicable settlement of the dispute within 21 days, > If the conciliation is unsuccessful, then the investor may request to refer the matter for arbitration. > The arbitration process to be concluded by arbitrator(s) within 30 days, which is extendable by 30 days with consent of the parties to dispute. > Investor to approach Market Participant for redressal of complaint > If investor is not satisfied with response of Market Participant, he/she has either of the following 2 options: May escalate the complaint on SEBI May also file a complaint on SMARTODR portal for its resolution through online > Upon receipt of complaint on SMARTODR portal, the relevant MII will review the matter and endeavour to resolve the matter > If the matter could not be amicably resolved, then to the matter shall be referred for conciliation. > During the conciliation process, the conciliator will endeavour for amicable settlement of the dispute within 21 days, > If the conciliation is unsuccessful, then the investor may request to refer the matter for arbitration. > If the parties are not satisfied with the arbitration award, option to file u/s 34 of Arbitration and Conciliation Act, 1996. |
5. Rights and Obligations of investors:
a) Investor has a Right to: [link provided by stock exchanges]
- Get a copy of KYC and other documents executed.
- Get Unique Client Code (UCC) allotted.
- Place order on complying with the norms agreed to with the Trading Member (TM).
- Get best price for trade execution.
- Receive various SMS, emails and information from TMs regarding trade confirmations.
- Get Contract notes for trades executed from the TM in the specified format given by the Exchange showing transaction price, brokerage, GST and STT etc. as applicable, separately, within 24 hours of your trades.
- Receive funds and securities/commodities on time within 24 hours from payout.
- Receive statement of accounts from TM at least once in a quarter/ month from your TM.
- Settlement of accounts as per terms of agreement.
- Get the details of Principal Officer/Compliance Officer of the TM.
- Get information of all the businesses done by the TM.
- Receive all benefits/material information declared for the investors by the Company.
- Prompt services from the company such as transfers, dematerialization, Sub-divisions and consolidation of holdings in the company.
- As an equity holder have a right to subscribe to further issue of capital by the Company.
- Approach nearest Common Investor Service Centre’s for lodging a complaint.
- Complaint and avail dispute resolution mechanism against TM or listed company.
- Raise queries on excess brokerage and other charges charged by TMs.
- File arbitration against TMs for disputes.
- Challenge the arbitration award before court of law.
- Privacy and Confidentiality.
- Fair & True Advertisement – Potential Risks to be clarified.
- Exit from financial product or service.
- Receive clear guidance and caution notice when dealing in Complex and High-Risk Financial Products and Services.
- Provide feedback on the financial products and service used.
b) Investor obligations/ Responsibilities [link provided by stock exchanges]
- Deal with a SEBI registered Stock Brokers and Depository Participants for opening trading account and demat account.
- Provide complete documents for account opening and KYC (Know Your Client). Fill all the required details in Account Opening Form / KYC form in own handwriting and cancel out the blanks.
- Read all documents and conditions being agreed before signing the account opening form.
- Accept the Delivery Instruction Slip (DIS) book from DP only (preprinted with a serial number along with client ID) and keep it in safe custody and do not sign or issue blank or partially filled DIS.
- Always mention the details like ISIN, number of securities accurately.
- Inform any change in information for updation of KYC and obtain confirmation of updation in the system.
- Regularly verify balances and transaction/ demat statement and reconcile with trades / transactions.
- Appoint nominee(s) to facilitate heirs.
- Do not fall prey to fraudsters sending emails and SMSs luring to trade in stocks / securities promising huge profits.
6. Guidance pertaining to special circumstances related to market activities: Default of Trading Members (TMs)
(1) When a TMs defaults, the Exchange carries out the following steps for benefit of investor:
- Dissemination on Exchange website with regard to default of the TM.
- Issue of Public Notice informing declaration of default by a TM and inviting claims within specified period.
- Intimation to clients of defaulter TMs via Emails and SMS for facilitating lodging of claims within specified period
(2) Following information made available on Exchange Website for information of Investors [link to be provided by the stock exchanges]:
- Norms for eligibility of claims for compensation from IPF.
- FAQ on processing of investors’ claims against defaulter TM.
- Form for lodging claim against defaulter TM.
- Standard Operating Procedure (SOP) for handling of Claims of Investors in the Cases of default by TMs
- Provision to check online status of claims on Exchange Website.
- Claim processing policy against Defaulter/Expelled TMs.
- List of Defaulter/Expelled TMs and public notice issued.
(3) Standard Operating Procedure (SOP) for Handling of Claims of Investors in the Cases of Default by TMs (excluding Commodity Derivatives Exchanges
| Sr. No. | Action | Timeline |
| 3. | Disablement of the TM | T day |
| 4. | Information to investors about disablement of the TM on website and through SMS and email | T+1 day |
| 5. | Pre-filled forms to be sent to clients providing information regarding balances with the TM (only in case of SOP trigger) |
T+15 days |
| 6. | Claim lodgment Clients to fill the claim form and provide the supporting documents | T+ 75 days However, client can lodge claims till the end of 3 years from the date of the public notice provided post default |
| 7. | Declaration of Default by the TM | T+120 days |
| 8. | Information to investors about default of TM on website, through SMS, email and newspapers. | Within 3 working days from the date of declaration of defaulter |
| 9. | Processing, auditing, and settlement of claims | Within 60 days of receipt of the claim form from the clients post declaration of default and T+135 days where prefilled forms are received. |
| 10. | Request for review of the claim by client | Within 90 days of receipt of intimation of the decision of the IPFT from the stock exchange |
| 11. | Processing, auditing, and settlement of review claims | Within 60 days of receipt of review application. |
| 7. | Request for 2nd review of the claim by client | Within 90 days of receipt of intimation of the decision of the IPFT from the stock exchange |
| 8. | Processing, auditing, and settlement of review claims | Within 60 days of receipt of review application. |
7. Dos and Don’ts – Advisory for Investors
a) Do’s of Investing: Please refer to the link [link provided by stock exchanges]
b) Do’s for Grievance Redressal: Please refer to the link [link provided by stock exchanges]
c) Don’ts of Investing: Please refer to the link [link provided by stock exchanges]
8. Code of Conduct for Stock Exchanges [link to be provided by the Exchanges]
A Stock Exchange shall:
(a) always abide by the provisions of the Act, Securities and Exchange Board of India Act 1992, any Rules or Regulations framed thereunder, circulars, guidelines and any other directions issued by the Board from time to time.
(b) adopt appropriate due diligence measures.
(c) take effective measures to ensure implementation of proper risk management framework and good governance practices.
(d) take appropriate measures towards investor protection and education of investors.
(e) treat all its applicants or members in a fair and transparent manner.
(f) promptly inform the Board of violations of the provisions of the Act, Securities and Exchange Board of India Act 1992, rules, regulations, circulars, guidelines or any other directions by any of its members or issuer.
(g) take a proactive and responsible attitude towards safeguarding the interests of investors, integrity of stock exchange’s systems and the securities market.
(h) endeavor for introduction of best business practices amongst itself and its members.
(i) act in utmost good faith and shall avoid conflict of interest in the conduct of its functions.
(j) not indulge in unfair competition, which is likely to harm the interests of any other Exchange, their participants or investors or is likely to place them in a disadvantageous position while competing for or executing any assignment.
(k) segregate roles and responsibilities of key management personnel within the stock exchange including:
a. Clearly mapping legal and regulatory duties to the concerned position
b. Defining delegation of powers to each position
c. Assigning regulatory, risk management and compliance aspects to business and support teams
(l) be responsible for the acts or omissions of its employees in respect of the conduct of its business.
(m) monitor the compliance of the rules and regulations by the participants and shall further ensure that their conduct is in a manner that will safeguard the interest of investors and the securities market.
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