Recently, SEBI vide its circular no SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/131 dated July 31, 2023, , has amended the SEBI (Alternative Dispute Resolution Mechanism) Regulations, 2023, in order to strengthen the existing dispute resolution mechanism in the Indian securities market through Stock Exchanges and Depositories (collectively referred to as Market Infrastructure Institutions or MIIs presently excluding Clearing Corporations and its constituents). Not only their scope of activities has been increased but also a common Online Dispute Resolution Portal (“ODR Portal”) is being established to take benefit of online conciliation and online arbitration process for resolution of disputes arising in the Indian Securities Market.
Who can access the ODR Portal?
Disputes between Individual Investors and Institutions
Disputes between Investors/Clients and listed companies (including their registrar and share transfer agents) or any of the specified intermediaries / regulated entities in securities market arising out of latter’s activities in the securities market, will be resolved in accordance with the provisions of the said circular and by harnessing online conciliation and/or online arbitration.
Listed companies / specified intermediaries / regulated entities OR their clients/investors (or holders on account of nominations or transmission being given effect to) may also refer any unresolved issue of any service requests / service related complaints for due resolution by harnessing online conciliation and/or online arbitration as specified in the circular.
Service related complaints shall include non-receipt/ delay of account statement, non-receipt/ delay of bills, closure of account/branch, technological issues, shifting/closure of branch without intimation, improper service by staff, freezing of account, alleged debit in trading account, contact person not available, demat account transferred without permission etc.
The following is the List of securities market intermediaries / regulated entities against whom investors may invoke the ODR process:
– AIFs – Fund managers
– CIS – Collective Investment management company
– Depository Participants
– Investment Advisors
– InvITs – Investment Manager
– Mutual Funds – AMCs (Including for any claims/complaints/disputes arising on account of Mutual Fund Distributors of the Mutual Fund AMCs)
– Portfolio Managers
– Registrars and Share Transfer Agents
– REITs – Managers
– Stock brokers including for any claims/complaints/disputes arising on account of Authorised Persons of the Trading Members
Disputes between institutional / corporate clients and specified intermediaries / regulated entities
Disputes between institutional or corporate clients and specified intermediaries / regulated entities in securities market can be resolved, at the option of the institutional or corporate clients:
a) in accordance with the SEBI circular and by harnessing online conciliation and/or online arbitration as specified in this circular; OR
b) by harnessing any independent institutional mediation, conciliation and/or online arbitration institution in India.
For existing and continuing contractual arrangements between institutional or corporate clients and specified intermediaries / regulated entities in the securities market as specified in Schedule B, such option should be exercised within a period of six months, failing which option as specified in (a) above will be deemed to have been exercised. For all new contractual arrangements, such choice should be exercised at the time of entering into such arrangements.
The intermediaries and regulated entities covered under this category are as follows:
1. Clearing Corporations and their constituents
2. Credit Rating Agency and rating clients
3. Custodians and their clients/FPIs
4. Debenture Trustees and issuers
5. Designated Depository Participant and their clients/FPIs
6. KYC Registration Agency and their clients/intermediaries
7. Merchant Banker and issuers
8. Mutual Funds and Mutual Fund Distributors
9. Proxy Advisory and their clients
10. Proxy advisors and listed entities
11. Registrars and Share Transfer Agents and their clients
12. Research Analyst and their clients
13. Stock brokers and their Authorised Persons
14. Trading Members and Clearing Members
15. Vault Managers and beneficial owners
Disputes between MII and its constituents
Disputes between MII and its constituents which are contractual in nature shall be included in the ODR framework at a future date as may be specified while expressly excluding disputes/appeals/reviews/challenges pertaining to the regulatory, enforcement role and roles of similar nature played by MIIs.
Introduction of the common Online Dispute Resolution Portal
The MIIs shall, in consultation with their empanelled ODR Institutions, establish and operate a common Online Dispute Resolution Portal (“ODR Portal”) through joint efforts. Each MIIs will identify and empanel one or more independent ODR Institutions which are capable of undertaking time-bound online conciliation and/or online arbitration (in accordance with the Arbitration and Conciliation Act, 1996 and any other applicable laws) that harness online/audio-video technologies and have duly qualified conciliators and arbitrators as per the norms for empanelment of ODR Institutions as also the continuing obligations of the ODR Institutions. The ODR Portal shall have due connectivity with each such ODR Institution as is required for undertaking the role and activities envisaged in the circular. Such ODR Portal shall establish due connectivity with the SEBI SCORES portal / SEBI Intermediary portal.
All the MIIs shall participate on the ODR Portal and provide investors/clients and listed companies (including their registrar and share transfer agents) and the specified intermediaries / regulated entities in the securities market access to the ODR Portal for resolution of disputes between an investor/client and listed companies (including their registrar and share transfer agents) and the specified intermediaries / regulated entities in the securities market, through time bound online conciliation and/or online arbitration.
All listed companies / specified intermediaries / regulated entities in the securities market (collectively referred to as “Market Participant/s”) shall enrol on the ODR Portal within the timelines as specified by the circular and shall be deemed to have been enrolled on the ODR Portal at the end such specified timeline. The enrolment process shall also include executing electronic terms/agreements with MIIs and the ODR Institutions, which shall be deemed to be executed at the end such specified timeline. Facility to register Market Participants into the ODR Portal by utilising the credentials used for SEBI SCORES portal / SEBI Intermediary portal may be also provided.
All market participants and MIIs are advised to display a link to the ODR Portal on the home page of their websites and mobile apps. Now, the listed companies, specified intermediaries, regulated entities or their clients and investors have all been brought under the ambit of ODR.
Timelines for Implementation
The provisions of the Circular will be implemented in phases:
Source: Sebi Circular dated 31.07.2023
Initiation of the dispute resolution process
An investor/client shall first take up his/her/their grievance with the Market Participant by lodging a complaint directly with the concerned Market Participant. If the grievance is not redressed satisfactorily, the investor/client may, in accordance with the SCORES guidelines, escalate the same through the SCORES Portal in accordance with the process laid out therein. After exhausting these options for resolution of the grievance, if the investor/client is still not satisfied with the outcome, he/she/they can initiate dispute resolution through the ODR Portal. (as amended)
Alternatively, the investor/client can initiate dispute resolution through the ODR Portal if the grievance lodged with the concerned Market Participant was not satisfactorily resolved or at any stage of the subsequent escalations mentioned in the paragraph 11 above (prior to or at the end of such escalation/s). The concerned Market Participant may also initiate dispute resolution through the ODR Portal after having given due notice of at least 15 calendar days to the investor/client for resolution of the dispute which has not been satisfactorily resolved between them.
The dispute resolution through the ODR Portal can be initiated when the complaint/dispute is not under consideration in terms of the applicable (amended) paragraph above or SCOREs guidelines as applicable or not pending before any arbitral process, court, tribunal or consumer forum or are non-arbitrable in terms of Indian law (including when moratorium under the Insolvency and Bankruptcy Code is in operation due to the insolvency process or if liquidation or winding up process has been commenced against the Market Participant) (as amended)
Fees & Charges
The dispute resolution through the ODR Portal can be initiated when within the applicable law of limitation (reckoned from the date when the issue arose/occurred that has resulted in the complaint/date of the last transaction or the date of disputed transaction, whichever is later). The costs of the dispute resolution mechanism on the ODR Portal will be borne in the following manner:
a. There shall be no fees for registration of a complaint/ dispute on the ODR Portal.
b. Fees for conciliation process (irrespective of claim or counter-claim value) will be as under:
Conciliator’s fee (to be collected by ODR Institution and paid to Conciliator)
- for successful conciliation – Rs. 4899/-
- for unsuccessful conciliation- Rs. 3240/-
- ODR Institution’s fees, in addition to the conciliator’s fees (to be collected by ODR Institution) – Rs. 600/-
Applicable GST, Stamp Duty, etc. on actual outgoings shall be borne by the concerned Market Participant
c. The fees for the arbitration process will be under Applicable GST, Stamp Duty, etc. on actual outgoings as:
For other details about the manner in which the fee shall be paid and the conciliation and arbitration proceedings shall be executed and other details related thereto, are given in the said SEBI Circular and as amended, which may be referred to.
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