Online Resolution of Disputes in the Indian Securities Market

Securities and Exchange Board of India (hereinafter referred to as “SEBI”) vide its circular number SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/131 dated July 31, 2023 introduced common Online Dispute Resolution Portal to streamline the existing dispute resolution mechanism in the Indian securities market under the aegis  of  Stock  Exchanges  and  Depositories  (collectively  referred  to  as  Market Infrastructure  Institutions (MIIs)), which  harnesses  online conciliation and online arbitration for resolution of disputes arising in the Indian Securities Market. The MIIs shall, in consultation with their empaneled ODR institutions, establish and operate a common Online Dispute Resolution Portal (“ODR Portal”).  SEBI through this circular expanded the scope of existing dispute resolution mechanism in Indian securities market. Now, any type of disputes between investors / clients and listed companies (including their registrar and share transfer agents) or any of the specified intermediaries / regulated entities in securities market (as specified in Schedule A of the circular) arising out of latter’s activities in the securities market, will be resolved in accordance with this circular and by harnessing online conciliation and/or online arbitration as specified in this circular. Listed companies / specified intermediaries / regulated entities OR their clients/investors (or holders on account of nominations or transmission being given effect to) may also refer any unresolved issue of any service requests / service-related complaints for due resolution by harnessing online conciliation and/or online arbitration as specified in this circular.   Further, disputes between institutional or corporate clients and specified intermediaries / regulated entities in securities market as specified in Schedule B of the circular can be resolved, at the option of the institutional or corporate clients:  

1. in accordance with this circular and by harnessing online conciliation and/or online arbitration as specified in this circular; or
2. by harnessing any independent institutional mediation, conciliation and/or online arbitration institution in India.  

Furthermore, for existing and continuing contractual arrangements between institutional or corporate clients and specified intermediaries / regulated entities in the securities market as specified in Schedule B, such option should be exercised within a period of six months, failing which option as specified in (a) above will be deemed to have been exercised.  For all new contractual arrangements, such choice should be exercised at the time of entering into such arrangements.  Moreover, disputes between MII and its constituents which are contractual in nature shall be included in the framework at a future date as may be specified while expressly excluding disputes/appeals/reviews/challenges pertaining to the regulatory, enforcement role and roles of similar nature played by MIIs. The MIIs shall, in consultation with their empaneled ODR institutions, establish and operate a common ODR Portal. The MIIs will make joint efforts to develop and operationalize the ODR platform. All the MIIs shall participate on the ODR Portal and provide investors/clients and listed companies  (including  their  registrar  and  share  transfer  agents)  and  the  specified intermediaries / regulated entities in the securities market access to the ODR Portal for resolution of disputes between an investor/client and listed companies (including their registrar and share transfer agents) and the specified intermediaries / regulated entities in the securities market, through time bound online conciliation and/or online arbitration. An investor/client shall first take up his/her/their grievance with the market participant by lodging a complaint directly with the concerned market participant. If the grievance is not redressed satisfactorily, the investor/client may, in accordance with the SCORES guidelines, escalate the same through the SCORES Portal in accordance with the process laid out therein.  After exhausting all available options for resolution of the grievance, if the investor/client is still not satisfied with the outcome, he/she/they can initiate dispute resolution through the ODR Portal. Alternatively, the investor/client could initiate dispute resolution through the ODR Portal if the grievance lodged with the concerned market participant was not satisfactorily resolved or at any stage of the subsequent escalations mentioned in the above paragraph (prior to or at the end of such escalation/s). The concerned market participant may also initiate dispute resolution through the ODR Portal after having given due notice of at least 15 calendar days to the investor/client for resolution of the dispute which has not been satisfactorily resolved between them. The ODR Portal shall have the necessary features and facilities to, inter alia, enroll the investor/client and the market participant, and to file the complaint/dispute and to upload any documents or papers pertaining thereto. It shall also have the facility to provide status updates on the complaint/dispute which would be obtained from the ODR institutions. A complaint/dispute initiated through the ODR Portal will be referred to an ODR institution empaneled by a MII. The ODR institution that receives the reference of the complaint/dispute shall appoint a sole independent and neutral conciliator from its panel of conciliators. Such conciliator shall have relevant qualifications or expertise as specified in Schedule D of the circular and should not be connected with or linked to any disputing party. MIIs shall ensure that appropriate measures are put in place regarding appointment of conciliators by the ODR institutions. The ODR institutions shall conduct conciliation and arbitration in the online mode, enabling online/audio-video participation by the investor/client, the market participant and the conciliator or the arbitrator as the case may be.  The investor/client may also participate in such online conciliation and arbitration by accessing/utilizing the facilities of Investor Service Centers (“ISCs”) operated by any of the MIIs. The provisions of this circular will be implemented in two phases: The first phase shall include:  

1. development of the ODR Portal, empanelment of ODR institutions by the MIIs, empanelment of conciliators and arbitrators by such ODR institutions on or before August 1, 2023. 
2. registration of trading members and depository participants on the ODR Portal by August 15, 2023, and  
3. commencement of registering of complaints/disputes against brokers and depository participants and their resolution on and from August 16, 2023. 

The second phase shall include: 

1. registration of all other Market Participants on the ODR Portal by September 15, 2023.  
2. commencement of registering of complaints/disputes against all other Market Participants and their resolution on and from September 16, 2023, and 
3. implementation of related processes and requirements envisaged in this Circular shall be in effect by September 16, 2023. 

Conclusion: In conclusion, SEBI has taken a significant step towards enhancing the dispute resolution mechanism in the Indian securities market. This circular marks a pivotal expansion of the existing dispute resolution framework. It mandates that a wide array of disputes between investors/clients and various entities operating in the securities market, such as listed companies, their registrar and share transfer agents, and specified intermediaries/regulated entities, should be resolved through online conciliation and/or arbitration as facilitated by the ODR Portal. This forward-looking approach leverages technology to ensure a more efficient, transparent, and accessible process for resolving conflicts. The process places the investor/client at the forefront, offering a structured approach to address grievances and ensure their rights are protected. The escalation pathway begins with a direct channel of communication between the investor/client and the market participant. This initial step encourages a prompt and amicable resolution at the source. Should the grievance persist, the SCORES Portal provides a transparent and standardized route for escalation, guided by established guidelines. The introduction of the ODR Portal as the final recourse underscores the adoption of technology to enhance accessibility and transparency. Investors/clients can initiate, track, and manage their dispute resolutions seamlessly through this platform. The role of ODR institutions stands as a cornerstone of the process. The appointment of impartial and qualified conciliators, in accordance with specified qualifications, ensures an unbiased approach to dispute resolution. This approach aligns with international best practices, promoting trust and confidence in the resolution process. The ODR Portal not only empowers investors/clients but also enables them to participate effectively through online conciliation and arbitration. The inclusion of ISCs extends support to those who may require physical access to the process. Overall, SEBI's introduction of the common ODR Portal is a forward-thinking stride that aligns with the modern digital landscape. By ensuring accessibility, transparency, and timely resolution, this circular underscore SEBI's commitment to bolstering investor confidence and fostering a conducive environment for the Indian securities market. The collaborative effort between MIIs and ODR institutions paves the way for a more harmonious and efficient securities market ecosystem.