Date: 2021-09-02Category: Not ApplicableState: Union GovernmentCountry: India
Amendment to SEBI Circular SEBI/HO/DMS/CIR/P/2017/15 dated February 23, 2017 on Amendment pursuant to comprehensive review of Investor Grievance Redressal Mechanism
**Executive Summary:**
This SEBI circular, dated September 02, 2021, amends the investor grievance redressal mechanism detailed in the February 23, 2017, circular. It addresses the place of arbitration, grievance redressal speed, legitimate claims from IPF, and interim relief thresholds. Stock Exchanges (excluding Commodity Derivatives Exchanges) and Depositories must amend bylaws, inform members/DPs, educate investors, and implement changes immediately.
**Key Points / Main Content:**
* **Arbitration Venue:**
* If the award amount exceeds Rs. 50 lakh, arbitration or appellate arbitration may occur in the nearest metro city if desired by any party.
* The party requesting the venue change bears any additional statutory arbitration costs.
* **Grievance Redressal Speed:**
* The stock exchange will refund the deposit to the party in whose favour the award has been passed, except the additional fees charged from the trading members if the claim is filed beyond the timeline.
* The additional fees charged from the trading members, if the claim is filed beyond the timeline, will be deposited in the IPF of the respective Stock Exchange.
* **Investor Protection Fund (IPF) Claims:**
* After a member is declared a defaulter, claims are presented to the Member Core Settlement Guarantee Fund Committee (MCSGFC) for sanction and ratification.
* MCSGFC's advice on legitimate claims is sent to the IPF Trust for immediate disbursement.
* If the claim exceeds IPF coverage or MCSGFC's sanctioned amount, the investor can pursue arbitration outside the exchange mechanism or other legal forums for the balance.
* **Interim Relief from IPF:**
* If a GRC order favours the client, and the member opts for arbitration, and the claim value is not more than Rs. 20 lakhs, 50% of the admissible claim or Rs. 2.00 lakhs (whichever is less) is released from the IPF.
* If the arbitration award favours the client and the member opts for appellate arbitration, a positive difference of 50% of the arbitration award or Rs. 3.00 lakhs (whichever is less) and the amount already released to the client will be released from the IPF.
* If the appellate arbitration award favours the client and the member applies to set it aside under Section 34 of the Arbitration and Conciliation Act, 1996, a positive difference of 75% of the appellate award or Rs. 5.00 lakhs (whichever is less) and the amount already released to the client will be released from the IPF.
* The total interim relief from IPF shall not exceed Rs. 10.00 lakhs in a financial year.
**Impact Analysis:**
* **Stock Exchanges (excluding Commodity Derivatives Exchanges) and Depositories:**
* *Impact:* Must update bylaws, rules, and regulations to align with the circular's provisions. Responsible for informing members, DPs, and investors about the changes.
* *Action Required:* Amend bylaws, rules, and regulations immediately, disseminate information through websites, and educate investors.
* **Members and Depository Participants (DPs):**
* *Impact:* Subject to the amended rules concerning arbitration, grievance redressal, and IPF claims.
* *Action Required:* Familiarize themselves with the changes and comply with the updated procedures.
* **Investors:**
* *Impact:* Benefit from the refined grievance redressal mechanism, including potential for venue change in arbitration, quicker processing, and revised interim relief from IPF.
* *Action Required:* Be aware of the changes to the grievance redressal process and interim relief amounts available from the IPF.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body for securities market in India.
Stock Exchanges: Recognized stock exchanges excluding Commodity Derivatives Exchanges and Depositories regulated by SEBI.
SEBI Circular SEBI/HOD/MRD/CIR/P/2021/625: Circular issued by SEBI on September 02, 2021, regarding amendment to Investor Grievance Redressal Mechanism.
SEBI/HOD/MSC/CIR/P/2017/15: SEBI Circular dated February 23, 2017, regarding comprehensive review of Investor Grievance Redressal Mechanism.
Investor Grievance Redressal Mechanism: Mechanism for addressing and resolving grievances of investors in the securities market.
IPF: Investor Protection Fund of the respective Stock Exchange.
Member Core Settlement Guarantee Fund Committee (MCSGFC): Committee responsible for sanctioning and ratifying legitimate claims from IPF for clients of defaulter members.
Arbitration and Conciliation Act, 1996: Indian law dealing with domestic arbitration, international commercial arbitration, and conciliation.
भारतीय प्रततभूतत और तितिमय बोर्ड
Securities and Exchange Board of India
CIRCULAR
SEBI/HO/MRD1/ICC1/CIR/P/2021/625 September 02, 2021
All recognized Stock Exchanges (excluding Commodity Derivatives Exchanges)/
Depositories
Sir/ Madam,
Sub: Amendment to SEBI Circular SEBI/HO/DMS/CIR/P/2017/15 dated February
23, 2017 on Amendment pursuant to comprehensive review of Investor
Grievance Redressal Mechanism
1. SEBI issued a Circular SEBI/HO/DMS/CIR/P/2017/15 dated February 23, 2017 on
Amendment pursuant to comprehensive review of Investor Grievance Redressal
Mechanism.
2. Pursuant to representation received from the stock exchanges, the following
paragraphs of the aforesaid circular stands modified/replaced as under:
A. Clause 1.H. is replaced as under:
“1.H. Place of arbitration / appellate arbitration
In case award amount is more than Rs. 50 lakh (Rs. Fifty lakh), the next level of
proceedings (arbitration or appellate arbitration) may take place at the nearest
metro city, if desired by any of the party involved. The additional statutory cost
for arbitration, if any, to be borne by party desirous of shifting the place of
arbitration.”
B. Clause 1.J. is modified as under:
“1.J. Speeding up grievance redressal mechanism
“(v) In all cases except the additional fees charged from the trading members, if
the claim is filed beyond the timeline prescribed in column 3, (only for member),
on issue of the arbitral award the stock exchange shall refund the deposit to the
party in whose favour the award has been passed.
Page 1 of 3(vi) The additional fees charged from the trading members, if the claim is filed
beyond the timeline prescribed in column 3, (only for member), if any, to be
deposited in the IPF of the respective Stock Exchange.”
C. Clause 2.E. is replaced as under:
“2.E. Determination of legitimate claims from IPF for clients of the
defaulter member
The Stock Exchanges shall ensure that once a member has been declared
defaulter, the claim (s) shall be placed before the Member Core Settlement
Guarantee Fund Committee (MCSGFC, the erstwhile Defaulters’ Committee)
for sanction and ratification. MCSGFC’s advice w.r.t. legitimate claims shall be
sent to the IPF Trust for disbursement of the amount immediately.
In case the claim amount is more than the coverage limit under IPF or the amount
sanctioned and ratified by the MCSGFC is less than the claim amount then the
investor will be at liberty to prefer for arbitration outside the exchange
mechanism / any other legal forum outside the exchange mechanism for claim
of the balance amount.”
D. Clause 2.F. is modified as under:
“2.F. Threshold limit for interim relief paid out of IPF in Stock Exchanges
(iii) In case, order is in favour of client and the member opts for arbitration
wherein the claim value admissible to the client is not more than Rs. 20
lakhs (Rs. Twenty lakhs), the following steps should be undertaken by the
Stock Exchange:
a) In case the GRC order is in favour of the client then 50% of the
admissible claim value or Rs. 2.00 lakhs (Rs. Two lakhs), whichever
is less, should be released to the client from IPF of the Stock
Exchange.
b) In case the arbitration award is in favour of the client and the member
opts for appellate arbitration then a positive difference of, 50% of the
amount mentioned in the arbitration award or Rs. 3.00 lakhs (Rs.
Three lakhs), whichever is less, and the amount already released to
the client at clause (a) above, shall be released to the client from IPF
of the Stock Exchange.
c) In case the appellate arbitration award is in favour of the client 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
mentioned in the appellate arbitration award or Rs. 5.00 lakhs (Rs.
Five Lakhs), whichever is less and the amount already released to
Page 2 of 3the client at clause (a) and (b) above, shall be released to the client
from IPF of the Stock Exchanges.
d) Total amount released to the client through the facility of interim relief
from IPF in terms of this Circular shall not exceed Rs. 10.00 lakhs
(Ten lakhs) in a financial year.”
3. The Stock Exchanges (excluding Commodity Derivatives Exchanges)/ Depositories
are directed 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/ DPs and also
to disseminate the same through their website; and
c) take steps to make the investors aware of the aforesaid changes/ modifications.
4. 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. All other provisions of the
relevant circulars will continue to be in force.
(iv) This circular is available on SEBI website at www.sebi.gov.in.
Yours faithfully,
Nirdosh Rajan Minz
Deputy General Manager
Email: nirdoshrm@sebi.gov.in
.
Page 3 of 3