Analysis of SEBI Circular No. SEBI/HO/OIAE/IGRD/CIR/P/2020/152 dated August 13, 2020 which is effective from 01st September 2020 related to Handling of SCORES complaints by stock exchanges and Standard Operating Procedure (SOP) for non-redressal of grievances by listed companies.

Background:

> This circular is being issued in continuation of SEBI Circular dated March 26, 2018 regarding redressal of investor grievances through SEBI Complaints Redress System (“SCORES”) platform and SEBI Circular dated January 22, 2020 on non-compliance with certain provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”). Of which, SEBI Circular dated January 22, 2020 empowers Stock Exchanges to take action against listed companies for non- compliance with the provisions of the Listing Regulations and circulars/guidelines issued thereunder, including failure to ensure expeditious redressal of investor complaints under Regulation 13 of the Listing Regulations in the interests of investors and securities market.

> The Circular has been divided into following parts to handle investor complaints and redressal mechanism, as explained below:

1. Handling of Complaints by stock exchanges

2. Action for failure to Redress Investor Complaints

3. Action after Redressal of Investor Grievance by the Company

> Handling of complaints by stock exchanges

– Investors shall take up their grievances for redressal with the concerned listed company directly.

– If the complainant has not approached the company earlier, SCORES platform may be used to submit grievances directly to the listed entity for resolution.

– The listed entity shall resolve the complaint within 30 days from receipt of compliant, if listed entity fails to resolve within 30 days, such direct complaints shall be forwarded to Designated Stock Exchange (“DSE”) through SCORES.

– The complainant shall submit all such details of the complaint in SCORES i.e., period of cause of event, date of grievance taken up with the etity etc. while lodging the complaint through SCORES platform, if the complainant had approached the company earlier. Such complaints shall be forwarded to the DSE.

– Once the compliant admitted through SCORES platform, the listed entity shall redress the complaint and submit an Action Taken Report (“ATR”) within 30 days from the date of receipt of such complaint.

– Failure to file the ATR within 30 days by listed entity or DSE opine that the complaint is not adequately redressed and consequently, the complaint remains pending beyond 30 days, the DSE shall issue remind the listed company through SCORES platform guiding expeditious redressal of the grievance within another 30 days.

– Once stock exchange satisfied with the response by the listed entity, it shall submit an ATR to SEBI.

– For any failure to redress investor grievances pending beyond 60 days by listed companies, stock exchange shall initiate appropriate action against the listed company as detailed in this circular.

> Action for failure to Redress Investor Complaints:

– For violation of Regulation 13 (1) of SEBI Listing Regulations, stock exchanges shall levy a fine of ₹1000 per day per complaint on the listed entity.

– DSE shall issue a notice to listed entity about the levy of fines and direct them to submit ATRs on the pending complaints and payment of fines within 15 days from the date of such notice. If listed entity fails, the notice shall be sent to promoter(s) of such entities, to ensure submission of ATRs on the pending complaints and payment of fines by the listed entity within 10 days from the date of such notice.

– Moreover, apart from above fines, the DSE shall forthwith intimate the depositories to freeze the entire shareholding of the promoters and promoter group in such entity as well as all other securities held in the demat account of the promoter and promoter group.

– The depository(ies) shall immediately freeze such demat accounts and intimate the promoter(s) about the details of non-compliances.

– The DSE may initiate other action as deemed appropriate, in case listed entity fails to pay the fine or resolve the complaint despite receipt of the notice as mentioned above. While issuing the aforementioned notices, the DSE shall also send intimation to other recognized stock exchange(s) where the shares of the non-compliant entity are listed.

– Stock exchanges may deviate from above steps, if reasons are recorded in writing.

– DSE shall forward the complaints against such listed companies to SEBI for further action, if no. of complaints exceed 20 or value involved is more than ₹ 20,00,000.

– Stock exchanges shall intimate SEBI through SCORES about all actions taken against the listed company for non-resolution of the complaints and non-payment of fines.

– The Time-line for handling complaints along with timelines on the actions to be taken by stock exchanges for non-resolution of investor grievances is provided in Annexure -1.

– Fine shall be computed and levied on a monthly basis during the non-compliance period and it shall continue to accrue till the date of redressal of grievance /filing of ATR by the company or till the company is compulsorily delisted, whichever is earlier.

> Action after Redressal of Investor Grievance by the Company:

– Company will be treated as compliant if it has redressed investor’s complaint and has paid fines (if any) levied.

– In case the promoters’ shareholding is frozen by the Exchange/ an intimation shall be given to depositories to unfreeze the promoter / promoter group holdings from the date of such compliance.

If the company has redressed the investor’s complaint but has not paid the accrued fines, the Exchange shall not levy further fines. However/ the promotersϜ shareholdings shall remain frozen till the payment of accrued fines.

If the company has not redressed the investor’s complaint but has paid the accrued fines, the Exchange shall continue to levy the fines and may initiate other action as deemed appropriate.

Notes:

– The stock exchanges shall take necessary steps to implement this circular. It shall disclose on their website the action(s) taken against the listed entities for non-compliance(s) with grievances; amount of fine levied, details regarding the freezing of shares, compliance etc.

– The above provisions are without prejudice to the power of SEBI to take action under the securities laws.

Exception to investor grievances redressal mechanism:

– The recognized stock exchanges may keep in abeyance the action against any non-compliant entity or withdraw the action in specific cases where specific exemption from compliance with the requirements under the Listing Regulations/moratorium on enforcement proceedings has been provided for under any Act, Court/Tribunal Orders etc.

The Annexure(s) are enumerated in the following page(s).

Annexure - Timelines for handing of complaints and actions in case of non-compliances

Annnexure -2 Nature of complaints for which the circular is applicable

Sources – https://www.sebi.gov.in/

Disclaimer: This write-up is prepared as a part of continuous knowledge update purpose only; for actual implementation consultation with advisors is highly recommended. Author of this Article nowhere responsible for any damage caused to any party while implementation whether directly or indirectly in any capacity. Reproduction of this write-up in full or part (including hosting on any app/website) without written permission is strictly prohibited.

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