Executive Summary:
This circular, issued by SEBI on June 3, 2022, amends the Investor Grievance Redressal Mechanism outlined in Circular No. SEBIHOMIRSDDOCCIRP2020226. The amendment modifies the arbitration process for disputes between members and clients. Stock Exchanges and Depositories must amend their bylaws and inform constituents. The circular takes effect on July 1, 2022.
Key Points / Main Content:
* **Amendment to Arbitration Clause:**
* For civil disputes between members and clients related to stock exchange transactions, the complaint must first be referred to the IGRC and/or the stock exchange's arbitration mechanism before other legal remedies are pursued.
* Arbitrators appointed under the Stock Exchange arbitration mechanism have the competence to rule on their jurisdiction regarding disputes between a stock broker and client arising out of the transactions in stock exchange.
* Complainants unsatisfied with the IGRC recommendation must use the Stock Exchange arbitration within three months of the recommendation date.
* The three-month deadline applies only when challenging an IGRC recommendation; otherwise, the Limitation Act, 1963 governs the time limit for arbitration filings.
* **Responsibilities of Stock Exchanges and Depositories:**
* Amend relevant bylaws, rules, regulations, and operational instructions to implement the circular.
* Notify constituents of the circular's provisions and disseminate the information on their websites.
Impact Analysis:
Stock Exchanges and Depositories:
* *Impact:* Required to update internal regulations and communicate changes to members.
* *Action Required:* Amend bylaws, rules, regulations, and operational instructions; notify constituents and disseminate information on websites.
Members (Stock Brokers):
* *Impact:* Must adhere to the revised arbitration process when resolving disputes with clients.
* *Action Required:* Refer disputes to IGRC/Stock Exchange arbitration before other legal remedies. Adhere to the three-month deadline for arbitration filings when challenging IGRC recommendations.
Clients (Investors):
* *Impact:* Subject to the revised arbitration process for resolving disputes with stock brokers.
* *Action Required:* Be aware of the requirement to first go through IGRC/Stock Exchange arbitration and the associated timelines.
Key Entities Referenced
Investor Grievance Redressal Mechanism: A mechanism to address and resolve grievances raised by investors, which is being further strengthened based on feedback from market participants.
SEBI: Securities and Exchange Board of India, the regulatory body issuing the circular.
Circular No. SEBIHOMIRSDDOCCIRP2020226: Previous circular being amended by this new circular, related to the Investor Grievance Redressal Mechanism.
Stock Exchanges: Entities where securities transactions occur and which are instructed to implement the circular.
Depositories: Entities that hold securities, and are advised to make necessary amendments for the implementation of the circular.
IGRC: Investor Grievance Redressal Committee, which handles complaints before arbitration.
The Limitation Act, 1963: The law governing the time limit for filing arbitration applications.
Securities and Exchange Board of India Act, 1992: The act under which SEBI derives its powers to issue the circular.
CIRCULAR
SEBI/HO/MIRSD/DOS3/P/CIR/2022/78 June 3, 2022
To
The Managing Director / Executive Director
All Stock Exchanges
Dear Sir / Madam,
Subject: Investor Grievance Redressal Mechanism
1. In order to further strengthen the Investor Grievance Redressal Mechanism, based on
feedback received from market participants, Circular No.
SEBI/HO/MIRSD/DOC/CIR/P/2020/226 dated November 6, 2020 is amended as
follows:
Amendment to Circular No. SEBI/HO/MIRSD/DOC/CIR/P/2020/226 dated
November 6, 2020 -
1.1 Clause 4 of the Circular No. SEBI/HO/MIRSD/DOC/CIR/P/2020/226 dated
November 6, 2020 shall be substituted with the following, namely, -
“4. Arbitration
(a) For any dispute between the member and the client relating to or arising out of the
transactions in Stock Exchange, which is of civil nature, the complainant/ member
shall first refer the complaint to the IGRC and/ or to arbitration mechanism provided
by the Stock Exchange before resorting to other remedies available under any
other law. For the removal of doubts, it is clarified that the sole arbitrator or the
panel of arbitrators, as the case may be, appointed under the Stock Exchange
arbitration mechanism may consider any claim relating to any dispute between a
stock broker and client arising out of the transactions in stock exchange, as per
law, and shall always be deemed to have the competence to rule on its jurisdiction.
Page 1 of 2A complainant/member, who is not satisfied with the recommendation of the IGRC
shall avail the arbitration mechanism of the Stock Exchange for settlement of
complaints within three months from the date of IGRC recommendation”
(b) The time period of three months mentioned in the previous sub-clause for filing
arbitration shall be applicable only for the cases where the IGRC recommendation
is being challenged. For any arbitration application received without going through
IGRC mechanism, the above time period of three months shall not apply, and for
such cases the limitation period for filing arbitration shall be governed by the law
of limitation, i.e., The Limitation Act, 1963.”
2. Stock Exchanges and Depositories are advised to:
a) Make necessary amendments to the relevant bye-laws, rules and regulations,
operational instructions, as the case may be, for the implementation of the above
circular; and
b) bring the provisions of this circular to the notice of their constituents and also
disseminate the same on the website.
3. This circular is being issued in exercise of powers conferred under Section 11 (1) of
the Securities and Exchange Board of India Act, 1992 read with Section 10 of the
Securities Contract (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 from July 1, 2022.
4. This circular is available on SEBI website at www.sebi.gov.in under the categories
“Legal Framework -> Circulars”.
Yours faithfully,
Pranjal Jayaswal
General Manager
Market Intermediaries Regulation and Supervision Department
Tel. No. 022-2644 9402
Email id - pranjal@sebi.gov.in
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