Investment Charter: An Overhaul of the Grievance Redressal System

Recently Securities and Exchange Board of India (SEBI) has brought out a series of Investment Charters specially crafted for various SEBI-registered intermediaries and regulated entities. The Investment Charters have been issued for Merchant Bankers, Stock Exchanges, Registrars and Transfer Agents, Debenture Trustees so far and it is likely that more such investor charters shall be brought for other SEBI-registered intermediaries such as Stock Brokers, Alternative Investment Funds, Portfolio Managers, Research Analysts, Investment Advisors and Depository Participant etc..

The objective of tailor-made investment charter is to address the specific needs and modalities of particular intermediaries and their respective domains so as to provide a more resilient, transparent and secure market to provide services and resolution of grievances in a timely and efficient manner.

For example in the case of Merchant Bankers, SEBI has developed separate disclosure requirements in line with the investment charters even for different events such as Initial Public Offerings (IPOs), Further Public Offerings (FPOs) Qualified Institutional Placements (QIPs), Preferential Issues, Rights Issues, Buyback of Securities, Delisting of Shares Substantial Acquisitions of Shares and Takeovers etc. Each of the charters need to be published by the intermediaries to which they relate. This will spread awareness about the importance and availability of the investor grievance mechanism and its efficient functioning towards resolving the grievances. This is a kind of exception reporting for complaints that are not resolved within reasonable time and so it is quite likely that intermediaries will make timely efforts to deal with and resolve investor complaints on priority basis.

SEBI is doing what it generally does: Protecting Investors and Providing Secured Markets

The investment charters have been broadly structured to include a vision and mission statement, details of services to be provided by the business entity to investors, rights and DOs and DON’Ts for the investors and the grievance redressal mechanism along with the timelines for resolution of investor grievances. Most of this information is already available through various circulars/regulations and guidelines issued by the market regulator from time to time but charting out all activities and mechanisms to deal with the grievances and difficulties faced by the investors as they engage with these intermediaries in their regular course of business has streamlined the scope, procedure, rights and obligations and complaint resolution methods for each intermediary and for each type of specific services they offer.

Investment Charter addresses Typical Issues faced by respective Market Intermediaries

Let us discuss the investment charter of the Registrar and Transfer Agents (RTAs) as a case study in order to understand how the investment charter of a particular intermediary typically deals with the investor grievance redressal system.

(a) Vision of RTAs Investment Charter

The vision is to be a trusted, transparent and prompt service provider to the investors, conforming to the highest standards of compliance, confidentiality and professionalism in conduct, to meet the obligation towards investors in Indian capital market

(b) Mission of RTAs Investment Charter

1. To maintain high standard of integrity in the conduct of business by fulfilling obligations in a prompt, ethical and professional manner.
2. To comply with all regulatory requirements in a time bound manner
3. To facilitate prompt service to investors by and through streamlining the process and harnessing technology
4. To facilitate easy approach, communication and interface with investors so as to resolve their queries / grievances

(c) Services provided by RTA to investors

1. Processing change in /up-dation of the KYC details of the investors for physical holdings like change of address/bank account details/ e-mail address /telephone/mobile/ nomination and PAN).
2. Processing and updating investor holding/title change requests viz name deletion, transmission, transposition, issue of duplicate shares, dematerialization and rematerialisation of securities.
3. Processing of other requests, viz., recording of declaration w.r.t. exemption / lower tax rates for TDS on dividend/interest, revalidation and reissue of dividend and interest instruments.
4. Execution and intimation of other corporate actions viz., ESOPs, Dividend payment, Stock split, Bonus issue and Merger/Demerger activities.
5. Communication of Rights issue entitlements.
6. Communication of Buyback, exit offer, takeover made by the company/ acquirer, and the procedure to be followed by investor in respect of these issues
7. Mandatory execution of transfer of shares and dividends to IEPF and transfer of undelivered share certificates to Suspense account.
8. Process grievance received through mails and Letters and those through SCORES also.

(d) Rights of Investors

1. Receive all the benefits/ material information declared by the Company.
2. Actively participate in the AGM / EGM of the company & E-voting events so as to be a part of the decision making of the Company’s business resolutions.
3. In case of any grievances, approach RTA, Depository, Company, Stock Exchange or SEBI for resolution within prescribed timelines.

(e) Do’s and Don’ts of Investors

(i) DOs are as under:

1. Encash dividend/Interest regularly to avoid transfer of unclaimed amount/underlying securities to IEPF.

2. Follow up diligently and promptly if you have not receive allotment intimation/ certificate / dividend / interest etc.

3. Ensure that your PAN is registered with the RTA for all your folios.

4. Ensure nomination is registered for all your securities to smoothen the transmission.

5. Ensure that all KYC details viz full postal address with PIN, mobile number, e-mail address etc. are updated to facilitate the RTA for sending communication.

6. Ensure that correct and complete Bank details are recorded with RTA to facilitate prompt electronic credit of dividend / interest / redemption amounts and eliminate possibility of unclaimed amounts / underlying securities being transferred to IEPF.

7. Promptly inform the RTA in writing and complete required formalities in case of loss of securities.

8. Ensure that the documents provided for availing any investor service request are complete in all respects and keep copies of documents sent to the RTA.

9. Monitor all corporate announcements pertaining to investments made.

(ii) DONTs are as Under:

1. Do not keep your folios without PAN.
 
2. Do not keep your folios without nomination
 
3. Do not deal with unauthorized persons for any investor service requests such as change in / up-dation of address, e-mail address, mobile number and bank details.
 
4. Do not share security details, viz. folio number, certificate number, distinctive number(s), bank details, specimen signature, KYC documents, etc. with unknown person(s).

(f) Timelines pertaining to various services provided by the RTA

Investor Charter is a Game Changer in the Grievance Redressal Mechanism

To conclude, SEBI has taken a very good initiative in working out the intermediary/business activity oriented Investment Charter for the market intermediaries regulated by it. They give a comprehensive and holistic information about the investor complaints’ scope, methods and approaches and it is now available on the website of the entity they deal with. The business entities are obligated to report the status of the investor complaints in the prescribed format for current and preceding months and give cumulative data for specified years.