CIRCULAR, CIR/MRD/ICC/30/2013, dated 26.09.2013
1) Reference may be made to
CIR/MRD/DSA/03/2013 dated January 20, 2012, CIR/MRD/DSA/24/2010 dated August
11, 2010 and MRD/DoP/SE/Cir-38/2004 dated October 28, 2004.
2) With a view to streamline and make more
effective the investor grievance redressal mechanism at Stock Exchanges, and
consequent to discussions with Stock Exchanges and Depositories, it has been
decided to shorten the time taken for the proceedings as well as to give
monetary relief to the investors, during the course of pendency of proceedings.
In this regard, Stock Exchanges are advised as under:
a) Stock Exchanges
shall ensure that all complaints are resolved at their end within 15 days as
mentioned in the circular no. CIR/MRD/ICC/16/2012 dated June 15, 2012. The
correspondence with the Member & investor (who is client of a Member) may
be done on email if the email id of the investor is available in the UCC
database. The Member (Stock Broker, Trading Member and
Clearing Member) shall provide a
dedicated email id to the stock exchange for this purpose.
b) In case the
matter does not get resolved, conciliation process of the exchange would start
immediately after the time lines stated in sub-para (a) above.
c) Investor
Grievance Redressal Committee (IGRC) shall be allowed a time of 15 days to
amicably resolve the investor complaint.
d) IGRC shall
adopt a two-fold approach i.e. for proceedings leading to direction to the
Member to render required service in case of service related complaints and
proceedings leading to an order concluding admissibility of the complaint or
otherwise in case of trade related complaints.
e) In case the
matter is not resolved through the conciliation process, IGRC would ascertain
the claim value admissible to the investor.
f) Upon conclusion
of the proceedings of IGRC, i.e. in case claim is admissible to the investor,
Stock Exchanges shall block the admissible claim value from the deposit of the
Member.
g) The Stock
Exchange shall give a time of 7 days to the Member from the date of signing of
IGRC directions as mentioned under sub-para (d) above to inform the Stock
Exchange whether the Member intends to pursue the next level of resolution ie.
Arbitration.
h) In case, the Member
does not opt for arbitration, the Stock Exchange shall, release the blocked
amount to the investor after the aforementioned 7 days.
i) In case, the
Member opts for arbitration and the claim value admissible to the investor is
not more than Rs. 10 lac, the following shall be undertaken by the Stock
Exchange
i. 50% of the
admissible claim value or Rs. 0.75 lac, whichever is less, shall be released to
the investor from IPF of the Stock Exchange.
ii. In case the
arbitration award is in favour of the investor and the Member opts for
appellate arbitration then a positive difference of, 50% of the amount
mentioned in the arbitration award or Rs. 1.5 lac, whichever is less and the
amount already released to the investor at clause (i) above, shall be released
to the investor from IPF of the Stock Exchange.
iii. In case the
appellate arbitration award is in favour of the investor and the Member opts
for making an application under section 34 of the Arbitration and Conciliation
Act, 1996 to set aside the appellate arbitration award, then a positive
difference of 75% of the amount determined in the appellate arbitration award
or Rs. 2 lac, whichever is less and the amount already released to the investor
at clause (i) and (ii) above, shall be released to the investor from IPF of the
Stock Exchange.
iv. Before release
of the said amounts from the IPF to the investor, the Stock Exchange shall
obtain appropriate undertaking/ indemnity from the investor against the release
of the amount from IPF, to ensure return of the amount so released to the
investor, in case the proceedings are decided against the investor.
v. If it is
observed that there is an attempt by investor/client either individually or
through collusion with Member(s) or with any other stakeholders, to misuse the
provision of this Circular, then without prejudice to the powers of the Board
to take action, appropriate action in this regard shall be taken against any
such person, by the Stock Exchange, including disqualification of the person so
involved from henceforth accessing the benefits of this Circular.
vi. In case the
complaint is decided in favour of the investor after conclusion of the
proceedings, then amount released to the investor shall be returned to IPF from
the blocked amount of the Member by the Stock Exchange and the rest shall be
paid to the investor.
vii. Total amount
released to the investor through the facility of monetary relief from IPF in
terms of this Circular shall not exceed Rs. 5 lac in one financial year.
viii. Stock Exchanges
may devise a detailed procedure with regard to release of funds from IPF and
recovery thereof and necessary formats of documentation.
ix. In case the
investor loses at any stage of the proceedings and decides not to pursue
further, then the investor shall refund the amount released from IPF, back to
the IPF. In case the investor fails to make good the amount released out of IPF
then investor (based on PAN of the investor) shall not be allowed to trade on
any of the Stock Exchanges till such time the investor refunds the amount to
IPF. Further, the securities lying in the demat account(s) of the investor
shall be frozen till such time as the investor refunds the amount to the IPF.
x. The Stock
Exchanges may also resort to displaying the names of such investors on their
websites if considered necessary.
3) With a view to rationalise the
timelines involved in the arbitration mechanism, Stock Exchanges are advised as
under:
a) As per clause
6.2 of circular no. CIR/MRD/DSA/24/2010 dated August 11, 2010 the Members are
required to file application for appellate arbitration within one month of the
date of receipt of arbitral award. Further as per section 34 (3) of the
Arbitration and Conciliation Act, 1996 the Members have three months to make an
application to set aside an arbitral award. In this regard, the Members shall
convey their intention to Stock Exchanges within 7 days of receipt of the
award, as regards whether such Members desire to challenge the arbitration
award/appellate arbitration award in Court or not.
b)
If
the Members do not express their intent to challenge the arbitration award/appellate
arbitration award then it would be presumed that Members does not intend to
challenge the award and the Stock Exchange shall take further steps accordingly.
In addition to
the above, the stock exchanges shall also take the below mentioned steps:
4) With a view to address complaints
regarding 'unauthorised trades' Stock Exchanges are advised to direct the
Members to put in place the following:
a) In case the
Member has made margin calls to the client and the client has failed to comply
with these margin calls, then the contract note issued by Member for
transactions owing to non-compliance of such margin calls would bear a remark
specifying the same.
b) The Member
shall maintain a verifiable record of having made such margin calls and that
the clients have not complied with the same.
5) With a view to assist investors engaged
in dispute resolution process, Stock Exchanges shall set up facilitation desks
at all investor service centres as specified by SEBI from time to time. These
facilitation desks would interalia also assist investors in obtaining
documents/details from Stock Exchanges wherever so required for making
application to IGRC and filing arbitration.
6) The stock exchanges are advised to:-
a) make necessary
amendments to the relevant bye-laws, rules and regulations for the
implementation of the above decision immediately;
b) bring the
provisions of this circular to the notice of the members of the stock exchange
and also to disseminate the same through their website; and
c) take steps to
make the investors aware of the scheme.
d) communicate to
SEBI, the status of implementation of the provisions of this circular in the
Monthly Development Reports to SEBI.
7) This Circular is issued in exercise of
the powers conferred under Section 11 (1) of the Securities and Exchange Board
of India Act 1992, read with Section 9(2)(n) and Section 10 of the Securities
Contracts (Regulation) Act, 1956 to protect the interests of investors in
securities and to promote the development of, and to regulate the securities
market and shall come into effect immediately.
8) This Circular is available on SEBI
website at www.sebi.gov.in.
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