[Opinion] Reshaping Investor Grievance Redressal | A Detailed Analysis

CS Vallabh M Joshi & Shravan Pai – [2023] 156 taxmann.com 483 (Article)

Background

Securities & Exchange Board of India [SEBI] revolutionized the manner of resolving investor grievances with the introduction of SEBI Complaints Redress System [SCORES].

Over the years since the introduction of SCORES, SEBI has been proactive in revamping the SCORES platform and the manner in which investor grievances are resolved in the securities market.

Since the date on which SCORES was launched it has been observed that SEBI has made timely changes with periodic reviews and has accordingly made the SCORES portal more efficient.

SEBI vide its master circular dt: November 7, 2022 [‘Master Circular’] combined all previous circulars issued by SEBI with regards to investor grievances and this Master Circular now provides for all SEBI circulars relating to investor grievance at one place.

Introduction

SEBI issued circular no. SEBI/HO/OIAE/IGRD/CIR/P/2023/156 dated September 20, 2023 [‘September 2023 Circular’] which has revamped grievance redressal mechanism through SCORES. Vide this September 2023 Circular SEBI has rescinded the relevant part of the Master Circular which shall be effective from 4th December 2023.

September 2023 Circular introduces a significant shift in the process of resolving investor grievances by offering investors two levels of review. Under September 2023 Circular, complaint lodged on SCORES will be automatically forwarded to the concerned entity and if required to the designated body thereby providing a two level of review system for the investors.

SEBI has in its Board Meeting Note dt: June 28, 2023, highlighting the need for revamping grievance redressal mechanism, has stated that under the existing SCORES grievance mechanism SEBI looks at the redressal provided by the entity and disposes the complaint with reasoned remarks. Due to the same, the impression that has been created is that the onus to resolve grievances is on SEBI. However, it is to be noted that onus of redressing the grievances is squarely the responsibility of concerned entities as the principal relationship of the investor is with entity directly. SEBI further highlighted that investor charters puts the onus to redress the investor grievances on concerned regulated entities. SEBI further stated that based on study of complaints handled by SEBI during last 3 financial years, SEBI has sought clarification in approximately 14 percent of ATRs received from entities. Therefore, 86% of ATRs of entities/Exchanges/Depositories are directly being communicated to the investors without need for SEBI to intervene. Further, Investors are broadly satisfied with the ATRs of entities as investors preferred review against closure of complaints in 5% of cases only. Hence in order to Redesign SCORES as a platform for the investors to seek timely redressal of their grievances from entities directly and for the investors who are dissatisfied with the redressal provided by entities, an opportunity for two levels of review be given even before option to opt for the ODR mechanism a consultation paper dt: May 19, 2023 was floated for public comments. This consultation paper along with its public comments received on it was discussed in SEBI Board Meeting dt: June 28, 2023 and the proposal for revamping SCORES mechanism was approved.

This article aims to dissect the key features outlined in the 20th September, 2023 SEBI circular shedding light on the enhanced mechanisms in the process of redressing Investor grievances.

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