September 23, 2023
In today's advanced world, the landscape of financial markets, disputes are an inevitable aspect. Investors and market participants often find themselves in conflicts,seeking a fair and efficient resolution. This is where SEBI, the Securities and Exchange Board of India, comes in as a regulatory authority playing a pivotal role in dispute resolution. On 31st July,2023 SEBI issued a circular, in order to streamline the presently available dispute resolution mechanism in the securities market under the aegis of stock exchanges and depositories Market Infrastructure Institutions (MIIs) — by introducing a common ODR portal. The new system will provide online conciliation and arbitration for dispute resolution arising in the securities market. In this article, we'll explore how SEBI plays an important role in resolving disputes in the financial market.We'll review various elements, including the use of technology, online dispute resolution, and the mechanisms for grievance.
SEBI stands for Securities and Exchange Board of India and it was established in 1988 and it was given statuary powers on 1992, on the basis of SEBI act. Its primary objective is to watch and control the Indian security market.
SEBI performs various regulatory functions, and one of the most critical is ensuring fair and transparent trading practices. It regulates the business in stock exchanges and any other securities markets as well as registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and other intermediaries. SEBI also regulates the working of venture capital funds, mutual funds, etc.
As per SEBI's recent circular, July 31, 2023, introduces a ODR platform that promises to revolutionize how disputes are handled within the Indian Securities Market.
Under the new regulations, disputes between Investors/Clients and listed companies, their registrar, share transfer agents, or specified intermediaries/regulatory entities in the securities market will be streamlined through the ODR Portal.
Service-related complaints, such as delays in account statements or improper services, can also find resolution via online conciliation and arbitration.
Institutional or corporate clients now have a choice in how they wish to resolve their disputes. They can opt for resolution through the ODR Portal or choose independent institutional mediation, conciliation, and online arbitration institutions in India. This choice must be made within specified time frames to ensure a swift resolution process.
Notably, disputes between Market Infrastructure Institutions (MIIs) and their constituents, which are contractual in nature, will be incorporated into this framework at a later date.
However, disputes related to regulatory and enforcement roles played by MIIs are excluded.
Market Infrastructure Institutions (MIIs) will collaborate with their empaneled ODR Institutions to establish and operate the ODR Portal. Agreements related to disputes will be executed and stamped online, subject to legal permissions.
The conciliation process aims to resolve disputes within a strict timeline of 21 calendar days, extendable by an additional 10 days by consent of the parties involved.
If disputes remain unresolved, parties can opt for online arbitration, subject to the payment of specified fees.
Market Participants initiating online arbitration must deposit 75% of the admissible claim value before commencing the process.
Failure to deposit may result in consequences, including potential 'Fit and Proper' assessments.
Arbitral awards must be adhered to within 15 calendar days, unless otherwise specified in the award. Non-compliance with arbitral awards should be promptly reported to SEBI for further action.
Parties wishing to challenge an arbitral award must meet specific deposit requirements to initiate the challenge process. Failure to deposit may result in adverse consequences, including the potential cancellation of registrations.
Fees for both the conciliation and arbitration processes are clearly defined in the regulations. These fees may be borne by either the MIIs or the concerned Market Participants, depending on the circumstances and who initiates the dispute resolution process.
The venue and seat of online proceedings are determined based on the location of the relevant MII's registered office.
SEBI's introduction of the ODR platform signifies a vital step towards modifying dispute resolution in the Indian Securities Market. This initiative, which comes with the Mediation Bill and India's evolving Alternative Dispute Resolution System, aims to create a more transparent, efficient, and investor-friendly environment for market participants, ultimately satisfying the need of participants in the market.