Introduction
In a significant move towards bolstering investor protection, the Securities and Exchange Board of India (SEBI) has issued a circular on 20 September 2023 (Circular) for redressal of investor grievances through SEBI's Complaint Redressal Platform (SCORES) and its Online Dispute Resolution Platform (ODR). The Circular will be effective from 4 December 2023.
Existing Framework
SCORES is a facilitative platform to address investor grievances against a (i) listed company; (ii) registered intermediary; or (iii) market infrastructure institution (MII) (individually Entity and together Entities). In August 2023, SEBI amended the regulations for certain entities1, thereby: (a) shortening the time to resolve the investor complaints (Complaint) from 30 to 21 days; and (b) permitting body corporates, to supervise grievance redressal process.
The Circular rescinds the 7 November 2022 circular and establishes Designated Bodies2 for complaints under SCORES. Notwithstanding the recission, any previous action taken under the rescinded circular shall be unaffected and deemed to have been taken under the Circular.
Key Provisions of the Circular
Submission and handling of the Complaint:
- Complaints lodged through SCORES are automatically forwarded to
the concerned Entity with a copy marked to the Designated Body.
Entities shall resolve the Complaint and upload the Action Taken
Report (ATR) on SCORES within 21 calendar days of receipt of the
Complaint. The ATR is automatically routed to the
complainant.
- SEBI may concurrently monitor the Entities and Designated Bodies grievance redressal process. The Designated Body shall monitor the ATRs submitted by the Entities.
First review of the Complaint:
- If a complainant is satisfied with the resolution provided vide
the ATR or does not file a review, the Complaint shall be disposed
on SCORES. However, if not satisfied, the complainant may request a
review within 15 calendar days from the date of the ATR.
- If a complainant files a review, or the Entity has not
submitted the ATR within 21 days, the Designated Body shall begin
the first review with the Entity. The revised ATR shall be
delivered by the Designated Body to the complainant via SCORES
within 10 days from the review request. SEBI shall handle the first
review Complaint for intermediaries, where no Designated Body is
appointed.
- This Circular permits Designated Bodies to monitor and handle grievance redressal and take non-enforcement actions and refer to SEBI the enforcement actions.
Second Review of the Complaint:
- Within 15 calendar days of the Designated Body submitting the
ATR, complainant may request a second review, through SCORES. If a
complainant is satisfied with the Designated Body's ATR or
does not opt for review, within 15 days, the Complaint will be
disposed of.
- If the complainant is not satisfied with the Designated
Body's ATR, or such ATR is not submitted within 10 days, SEBI
may initiate review with the stakeholders, including the Entity
and/or Designated Body. The Entity and/or Designated Body must
submit a revised ATR to SEBI through SCORES, within the timeline
specified.
- SEBI or the Designated Body may seek the Entity's clarification on the ATR submitted for review. The second review Complaint shall be treated as ‘resolved', ‘disposed' or ‘closed' only upon SEBI's disposal or closure of the Complaint in SCORES and not merely upon filing of the ATR for SEBI review.
SCORES authentication for registered intermediaries and MII's:
- The procedure for generation of SCORES user ID and password is
automated for all SEBI registered intermediaries and MIIs
registered / recognized by SEBI after 2 August 2019. Upon
completion of the online process and grant of registration by SEBI,
the SCORES login credentials are sent through auto-generated
e-mails of the contact person, or the compliance officer as
provided in the online registration form.
- Stockbrokers and depository participants shall also obtain SCORES authentication.
SCORES authentication for companies to be listed on recognized stock exchanges:
- Online SCORES authentication by way of a declaration, with an
online form, signed by the Compliance Officer on their letter head
is required for all companies to be listed, stating:
- If listing on main board: that the board has filed, the draft red herring prospectus.
- If listing on SME / debt platform of stock
exchange: that an application to list its securities is
filed with stock exchange or an in-principal approval is
obtained.
- SCORES credentials shall be sent to the Compliance Officer or
dealing officer's email Id.
- Listed companies can process the complaints either in-house or through their registrar to issue and share transfer agent (RTI/STA). In case the RTA/STA process the Complaint, any failure on their part will be treated as the listed company's failure to furnish information to SEBI and counted towards non-redressal of investor complaints
Requirements applicable to Designated Bodies:
- Designated Bodies must take SCORES authentication from SEBI,
provide a generic e-mail id., appoint one nodal officer, have
adequate infrastructure to comply, to curb data leakage and share
management information systems (MIS) reports, with the Entities and
SEBI, as required.
- Designated Bodies having their own Complaint redressal portal and wishing to integrate it with SCORES shall write to SEBI at scores@sebi.gov.in.
Action for failure to redress investor complaints by listed companies:
- Designated Stock Exchange (DSE) shall levy a fine of INR 1,000
per day (from T + 61 days) per Complaint, where T refers to the day
the Complaint is received in SCORES by the listed company, or a
company suspended from trading on the stock exchanges.
- DSE shall issue a notice to the listed company to pay fines
within 15 days and submit the ATR. In case of non-compliance, on T
+ 76 days DSE shall issue a notice to the listed company's
promoter(s) requiring compliance within 10 days. If non-compliance
persists, on T + 86 days DSE shall inform the depository(ies) to
freeze the promoter(s) shareholding in such listed company and its
securities held in the promoter(s) demat account. DSE may take
additional measures if the listed entity's non-compliance
continues and notify other recognized stock exchanges where the
company's shares are listed.
- During non-compliance, the fines shall be assessed on a monthly
basis, and continue until the company files an ATR stating that its
grievance is resolved, or the company is forcibly delisted,
whichever is earlier.
- Stock exchanges shall transmit Complaints to SEBI only upon exhausting all options and if there are more than 20 pending Complaints or the Complaints exceed INR 10 lakhs. The stock exchanges shall notify SEBI of the actions taken for failing to resolve complaints or pay the fines. Any procedural deviation shall require documented reasons.
General provisions regarding investor grievance redressal:
- Investors must first address their concerns to the
Entity's designated compliance and investor complaint
officials. Then within 1 year from the date of occurrence, they may
lodge a Complaint, by registering on SCORES and providing requisite
PAN and contact details.
- Following Complaints are excluded from SCORES processing:
- against unlisted/delisted companies, or companies on
dissemination board of stock exchanges (except those related to
securities valuation);
- tied to court cases or quasi-judicial matters, disputes within
ODR managed by MIIs,
- falling within the jurisdiction of other regulatory bodies /
ministries;
- against companies undergoing resolution under the insolvency
and bankruptcy code;
- against companies removed from the register, or vanishing, or
liquidated companies; or
- categorized as market intelligence, for violations of
securities laws reported to SEBI.
- against unlisted/delisted companies, or companies on
dissemination board of stock exchanges (except those related to
securities valuation);
- The complainant may choose appropriate remedies through ODR or approach other legal forums (civil or consumer courts) if not satisfied with the SEBI review or the dispute is in the nature of a lis or the issues require third party rights adjudication. If an alternative is chosen, while the Complaint is pending in SCORES, the Complaint will be deemed resolved.
Comment
This Circular reinstates the regulator's commitment to create an efficient and investor-friendly regulatory environment. To comply with the revised framework, the Entities would need to invest more resources and manpower to handle complaints within the shorter timeframes.
Nevertheless, this Circular is a welcome step towards safeguarding investor interests, as it promotes a culture of accountability among the market participants and encourages timely resolution of complaints.
Footnotes
1. Namely, stockbrokers, merchant bankers, registrar to an issue, debenture trustees, bankers to an issue, mutual funds, collective investment scheme, securitized debt issuers, alternative investment funds, investment advisers, research analysts, real estate investment trusts, infrastructure investment trusts, listed entities, depositories, depository participants, portfolio managers, vault managers, and issuers of municipal debt securities
2. defined as stock exchanges, depositories, Association of Investment Bankers of India (AIBI), Association of Portfolio Managers in India (APMI),
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