SEBI Revamps Grievance Redressal Tool At Bourses, Depositories

The markets regulator Securities and Exchange Board of India (SEBI) on Thursday put in place a new set of norms to enhance the effectiveness of grievance redressal mechanism at stock exchanges and depositories.

The new norms include public dissemination of profiles of arbitrators, performance review of such arbitrators, three-stage fee structure for faster implementation of award and to discourage delayed filling of arbitrations by trading members.

The decision to revamp the grievance redressal mechanism at stock exchanges and depositories has been taken in consultation with all the stakeholders.

To enhance transparency and provide choice to parties, SEBI said exchanges and depositories will have to disseminate information like brief profile, qualification, areas of experience, number of arbitration matters handled and pre-arbitration experience of the arbitrators on their website.

Besides, market infrastructure institutions (MIIs)-- stock exchanges and depositories -- will have to create a common database of defaulting clients accessible to trading members and depository participants across stock exchanges and depositories, SEBI said in a circular.

The regulator said that there will be separate panels for arbitration and appellate arbitration. Further, for appellate arbitration, at least one member of the panel should be a retired judge. However, stock exchanges and depositories will have to obtain prior approval of SEBI's before empanelment.

SEBI said that investor service committee of the stock exchanges/depositories will review the performance of the arbitrators annually and submit the review report to the board of bourses/depositories.

The arbitrator fee will be upwardly revised to Rs 18,000 per case. Consequent to this upward revision, the additional expenses attributable to a client over and above the fee will be borne by the client and stock exchange or depository equally.

In case, award amount is more than Rs 50 lakh, the next level of proceedings can take place at the nearest metro city, if desired by any of the party involved. The additional cost for arbitration, if any, to be borne by the appealing party.

Besides, SEBI has put in place a three-stage fee structure in order to have faster implementation of award and to discourage delayed filling of arbitrations by trading members.

In case, the amount of claim is Rs 10 lakh, a fee of 1.3 per cent subject to a minimum of Rs 10,000 will be charged if claim is filed within 6-month from the date of dispute, it will rise to 3.9 per cent subject to a minimum of Rs 30,000 if the claim is filed after 6-month or after one month of the order passed by Investor Grievance Resolution Panel (IGRP), whichever is later.

After that time period, charges mentioned above as well as an additional fee of Rs 3,000 per month will be charged.

In case, the amount of claim is in between Rs 10 lakh and Rs 25 lakh then Rs 13,000 along with 0.3 per cent of Rs 10 lakh will be charged if claim is filed within 6-month, Rs 39,000 plus 0.9 per cent of Rs 10 lakh if 6-month time period exceeds and after that an additional fee of Rs 6,000 per month.

If the claim amount is Rs 25 lakh, then Rs 17,500 plus 0.3 per cent of Rs 25 lakh will be charged if claim is filed within 6-month, Rs 52,500 plus 0.6 per cent of Rs 25 lakh if 6-month time period exceeds and after that an additional fee of Rs 12,000 per month.

"A client, who has a claim /counter claim up to Rs 10 lakh and files arbitration reference, will be exempted from filing the deposit," SEBI said.

Excess of filing fee over fee payable to the arbitrator, if any, to be deposited in the Investor Protection fund (IPF) of the respective stock exchange. These filing fee will be utilised to meet the fee payable to the arbitrators.

In order to ensure effective utilisation of interest income on IPF, supervision of utilisation of interest on IPF will rest with the IPF Trust, while Investor Service Committee will supervise Investor Service fund (ISF).

With an aim to ensure the adequacy of corpus of the IPF, stock exchanges and depositories will periodically review the sources of the fund and the eligible compensation amount so as to recalibrate the fund to make suitable recommendation for enhancement.

The regulator said that investor protection fund will be used to meet the legitimate investment claims of the clients of the defaulting members and promotion of investor education and investor awareness among others.

Investor Service fund will be used only for promotion of investor education and at least 50 per cent of the fund should be spent at Tier II and Tier III cities.

In the event of default by the member, all transactions executed on exchange platform will be eligible for settlement from IPF subject to the appropriate norms laid down by the defaulters' committee.

Stock exchanges, in consultation with the IPF Trust and SEBI, will review and progressively increase the amount of interim relief available against a single claim for an investor, at least every three years.

SEBI said that committee on disciplinary action, defaulters, investor services IPF Trust will have maximum of members. Independent directors will form a majority of these committees.

Stock exchanges, depositories will have to make necessary arrangements in terms of hardware – computer, scanner, printer to facilitate the clients to convert their documents into electronic format. Such electronic format will be provided to the arbitrators along with original submissions in physical copies.