Arbitration Mechanism and Investor Grievance Redressal Mechanism

With a view to streamline the investor grievance redressal mechanism at Stock Exchanges and make it more effective from the angle of investor protection, SEBI has decided to give monetary relief  to investors having claims upto Rs.10 lac, during the course of proceedings from the Investor Protection Fund of Stock Exchange. Further, SEBI has decided to shorten the time taken for these proceedings.

1.  Some of the salient features of the initiatives taken are as under:

a)    It has been decided to empower IGRC (Investor Grievance Redressal Committee) in the stock exchange to look into admissibility of claims in addition to conciliation process. As such, if the complaint is not resolved through conciliation process, IGRC, on conclusion of the proceedings may ascertain the claim amount admissible to the investor, which the Stock Exchange shall block from the deposit of the concerned Member. The Stock Exchange shall give a time of 7 days to the Member from the date of signing of IGRC directions, to inform the Stock Exchange whether the Member intends to pursue the next level of resolution ie. Arbitration.

b)    In case, the Member does not opt for arbitration, the Stock Exchange shall, release the blocked amount to the investor after aforementioned 7 days.

c)    In case, the Member opts for arbitration and the claim value admissible to the investor is not more than Rs. 10 lac, the monetary relief from IPF would be given to the investor as mentioned below:

  i. 50% of the admissible claim value or Rs. 0.75 lac, whichever is less, shall be released to the investor from IPF of the Stock Exchange.

 ii. In case the arbitration award is in favour of the investor and the Member opts for appellate arbitration then a positive difference of, 50% of the amount mentioned in the arbitration award or Rs. 1.5 lac, whichever is less and the amount already released to the investor at clause (i) above, shall be released to the investor from IPF of the Stock Exchange.

 iii. In case the appellate arbitration award is in favour of the investor and the Member opts for making an application under section 34 of the Arbitration and Conciliation Act, 1996 to set aside the appellate arbitration award, then a positive difference of 75% of the amount determined in the appellate arbitration award or Rs. 2 lac, whichever is less and the amount already released to the investor at clause (i) and  (ii) above, shall be released to the investor from IPF of the Stock Exchange.

  1. In order to address the complaints regarding ‘unauthorised trades’, the Stock Exchanges have been advised to ensure that the contract note issued by Member for transactions owing to non-compliance of margin calls would bear a remark specifying the same and the Member would maintain a verifiable record of having made such margin calls and that the clients have not complied with the same.
  2. Further, Stock Exchanges have been asked to set up facilitation desks at all investor service centres which would interalia also assist investors in obtaining documents/details from Stock Exchanges wherever so required for making application to IGRC and filing arbitration.
  3. Further, to lessen the burden of such investors, the amount payable by the investor for appellate arbitration has been reduced from Rs.30,000/- to Rs.10,000/-

Details in this regard may be seen in SEBI circulars no: CIR/MRD/ICC/29/2013 dated September 26, 2013 and MRD/ICC/30/2013 dated September 26, 2013 on SEBI website www.sebi.gov.in.

PR No. 94/2013

Mumbai

September 26, 2013

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