SEBI

SEBI Circular on Redressal of Investor Grievances through SCORES

The SEBI is the regulatory body of the financial instruments market in India. It is the apex body that regulates the buying and selling of securities. In addition to this, the SEBI is also responsible for protecting the investor’s interests; therefore, to further achieve this objective, the SEBI has launched a complaints redressal system “SCORES” on June 2011. The objective of introducing SCORES^[1] was to provide administrative support to the investor whose complaint remains unresolved by the listed company, registered intermediary and recognized Market Infrastructure Institutions (MII). The present article will discuss in detail the provisions enumerated under the circular for the redressal of investor grievances.

How to file a complaint on the SCORE platform?

The aggrieved investor must first take up their grievance with the concerned entity through their designated persons who handle issues relating to the redressal of investor grievances. In the case where the entity is unable to provide redressal of investor grievances, in that case, the investor is eligible to file a complaint on SCORES. The procedure for filing a complaint under the SCORES are:

1. The investor must first register on the SCORES website by filing details such as the investor’s name, PAN, Contact Details, E-mail ID, Aadhaar Card, Central KYC, etc.
2. Upon Successful registration, an e-mail is sent to the investor’s registered mail id, which contains the User ID and the password.
3. The complainant may use SCORES to file a complaint directly to the concerned entity for resolution. This type of complaint is known as a “Direct Complaint” and must be redressed within 30 days.
4. If the complaint is not redressed within 30 days in that case, the SEBI will intervene and take up the case for consideration.

What is the time-limit for filing a complaint on the SCORES platform?

To enhance the accuracy, speed and time in the redressal of investor grievances, it is required that the grievance shall be filed on SCORES within 1 year from the date when the action arises provided:

• The complainant has first approached the registered intermediary, the listed entity or MIIs for the redressal of investor grievances.
• The concerned entity has rejected the complaint.
• There is no communication whatsoever from the concerned entity regarding the complaint.
• The complainant is not satisfied with the reply of the concerned entity.

What are the conditions for the rejection of a complaint by SEBI?

 The SEBI reserves the right to reject the complaint of the investor if:

• The date of the action is more than 1 year
• The complainant has not approached the concerned entity before the said date.

Review of Complaint:  In case if the complainant is not satisfied with the manner of redressal of investor grievances by the concerned entity, in that case, the complainant may file a review of the redressal within 15 days from the closure date of the complaint on SCORES. After which, the complaint shall be taken up for consideration by the supervisory official of the dealing officer of SEBI.

What type of complaints shall not be dealt with under the SCORES platform?

The following types of complaints for redressal of investor grievances shall not be dealt with under the SCORES platform:

• Complaint against companies that are delisted or unlisted.
• Companies on the dissemination of Stock Exchanges (except complaints on the valuation of securities)
• Complaint in relation to cases pending in court or subject matter of quasi-judicial proceedings etc.
• Complaints are to be filed under different regulatory bodies or other ministries.
• Complaint against companies under the relevant provisions of IBC 2016.
• Complaint against companies whose name is written off from the register of companies.
• Companies under liquidation or liquidated.

What are the different SCORES of authentication?

A. SCORES Authentication for intermediaries and MIIs

The procedure for generating SCORE user id and password by new SEBI-registered intermediaries and SEBI-recognized or registered MIIs is fully automated. Upon successful registration on the SCORE portal, the user id and password will be sent to the e-mail id of a contact person or compliance officer.

However, the stock exchanges and depository participants cannot obtain SCORE authentication as the complaints against them shall be routed through the platforms of the concerned stock exchange or depository. 

B. SCORES Authentication for companies willing to list their securities on SEBI-recognized stock exchanges

The companies intending to list their securities on stock exchanges can obtain online SCORE authentication. Companies must visit the SCORE portal and go through the Instruction document before submitting the form. While filing the form, the companies shall attach the following declarations on the letterhead of the company, which should contain the signature of the compliance officer:

1. Companies intending to list on Mainboard: Declaration of submission of DRHP with SEBI
2. Companies intending to list on SME or Debt Platform of stock exchange: Declaration of submission of application to list securities with a stock exchange and consequently approval has been obtained from such stock exchange.

However, it is pertinent to mention that any complaint against listed companies can be processed in-house or through Registrar to Issue (RTI) and Share Transfer Agent (STA). In case the RTI or STA is unable to redress the complaint of the investor, or there is a failure to report Action Taken Report (ATR) in SCORES, it may be considered that there is a failure of a listed company to provide redressal of investor grievances and a failure to furnish information to SEBI.

How shall stock exchanges handle complaints against listed companies?

The stock exchange shall handle the complaints in the manner provided below:

Types of Complaint

The stock exchange is the first resort for the following categories of complaints against a listed company:

1. Non-updation of address or signature or corrections etc.
2. Non-receipt of:
   • Bonus
   • Dividend
   • Duplicate Debt Securities certificate
   • Duplicate share certificate
   • Fractional entitlement
   • Interest for delay in dividend
   • Interest for delay in payment of interest on a debt security
   • Interest for delay in redemption proceeds of a debt security
   • Interest for delay in redemption proceeds of a debt security
   • Interest on securities
   • Interest on securities
   • Interest on securities
   • Interest on securities
   • Interest on securities
   • Securities after transfer
   • Securities in public/ rights issue
   • Shares after conversion/ endorsement/ consolidation/ splitting
   • Shares after transfer
   • Shares after transmission
   • Shares after transmission
   • Interest for delay in dispatch or credit of securities
3. Receipt of refund or dividend in the physical mode despite the electronic mode
4. Receipt of shares in the physical mode despite the electronic mode
5. Demat or Remat
6. Complaints of any other nature as may be specified from time to time

Types of complaints not to be handled

The stock exchange shall not handle the following complaints and forward them in the following manner.

S. no.	Complaints	Process for handling complaints
1.	Deposits under Sections 73 & 74 of the Companies Act 2013Complaint against Nidhi companies All matters delegated under overriding powers of the Companies Act 2013Complaints againstdividends and securities transferred to IEPF	Forward the complaint to MCA, and an intimation is sent to the complainant.
2.	Pension Funds	Forward the complaint to PFRDA, and intimation be sent to the complainant.
3.	Monopoly and anti-competitive practices	Forward the complaint to CCI, and intimation be sent to the complainant.
4.	Chit Funds	Request the complainant to visit the Registrars of chit funds for the concerned state.
5.	Insurance Companies or Brokers or Agents or products and Services	Forward the complaint to IRDAI, and intimation be sent to the complainant.
6.	Housing Finance Schemes	Request be made to the complainant to visit RBI and National Housing Bank.
7.	Companies whose moratorium order is passed in winding up or insolvency proceedingsCompanies under liquidation or where an official liquidator is appointed	Request be made to the complainant to approach the official liquidator or NCLT

Procedure for handling complaints

The procedure for handling complaints shall be as follows:

1. On receipt of the complaint on SCORES, the stock exchange shall send the complaint to the company. In response, the company must provide redressal of investor grievances and submit ATR with the stock exchange within 30 days of receiving the complaint.
2. In case ATR is not submitted within 30 days, or the stock exchange is of the opinion that the redressal of investor grievances is not appropriate and the complaint is pending for more than 30 days, then the stock exchange may send a reminder to the company for expeditious redressal of complaint.
3. After being satisfied with the company’s response, the Stock exchange submitted the ATR with SEBI.

What is the action for failure to redress investor grievances by listed companies?

If the redressal of investor grievances takes more than 60 days, then a stock exchange will take appropriate action against the listed company as enlisted below:

Fine: The designated stock exchange shall levy a fine of Rs 1000 per day per-complaint on the listed company. Further, the fine shall be levied on the companies suspended from trading on stock exchanges.

Notice to listed company: The designated Stock exchange shall send a notice to the listed company, which shall specify the levy of fine. The notice shall further direct the company to submit ATR on the pending complaints along with payment of the fine within 15 days from the notice date.

Notice to promoters of the company: If the listed company fails to pay the fine or provide redressal of investor grievances within 15 days, in that case, the designated stock exchange shall issue notice to the promoter of the company and directs them to submit ATR and pay the fine within 10 days from the notice date.

Failure to comply: If the listed company or the promoter fails to comply with the requirements under notice or pay a fine, in that case, the entire shareholding and other securities held in the DEMAT account of the promoter shall freeze by the depository and an intimation be sent to the promoter against such action. 

Intimation to the Recognized stock exchange: The designated stock exchange shall also inform the recognized stock exchanges against issuing such notices.

Forward complaint to SEBI: After exhausting all the options mentioned above, if the number of the pending complaint is more than 20 or the amount involved in such complaints is more than Rs 10 lakhs, in that case, the stock exchange shall send all the complaints to the SEBI for further action. Further, the stock exchange shall inform SEBI through SCORES about all the actions taken against it for non-compliance of notice or non-payment of fine.

Amount and period of Fine: The fine shall be levied on monthly basis during the non-compliance period. The amount of fine shall continue to accrue till:

1. Date of filing ATR
2. Redressal of investor grievances by the company
3. Company is compulsorily delisted

Timeline for handling complaints and actions by stock exchanges for non-resolution:  The timeline for handling complaints and actions by stock exchanges for non-redressal of investor grievances shall be:

S. No.	Activity	Number of Calendar days
1.	Handling of Complaint
a.	Complaint received by a listed company on SCORES platform	T
b.	Response to be received from the listed company	T+30
c.	Reminder to a listed company in case of no response	T+31
d.	Response to be received from a listed company	T+60
2.	Action in case of non-compliance
a.	Notice to the listed company of intimating fine of Rs 1000 per day per complaint for non-redressal of investor grievances within 60 days.	T+61
b.	Notice to the promoter for non-redressal of complaint and payment of fine	T+76
c.	Freezing of shareholdings	T+86
d.	Any other action by stock exchanges
e.	After exhausting all options, if the number of pending complaints is more than 20 or the amount involved in such complaints is more than Rs 10 lakhs, in that case, the stock exchange shall send all the complaints to the SEBI for further action.

What are the actions after the redressal of investor grievances by the listed company?

 The company will be treated as in compliance if it has redressed the investor complaints and has paid the fines.

Unfreeze promoter’s shareholding: The shareholding of the promoters will be unfrozen by the depository from the date of compliance.

Non-levying of fines: The designated stock exchange will stop levying fees if the listed company has redressed the complaint but has not paid the accrued fines. However, the promoter’s shareholding will remain frozen until accrued fines are paid.

Payment of accrued fines: If the company has not provided redressal of investor grievances but has paid the accrued fines, in that case, the stock exchange shall continue to levy fines and take appropriate action.

Implementation of the circular: The stock exchange must take the requisite steps to comply with the provisions of the circular. It shall disclose on the website each action taken against non-redressal of investor grievances, levying of fine, details of freeing of promoter shareholding etc.

Continuation of action and exemption: The stock exchange may continue action against the non-compliant entity and withdraw action in cases where the exemption for compliance under LODR regulations on enforcement proceedings is provided under any act, court or tribunal etc.

What are the other general provisions for the redressal of investor grievances?

Review of redressal mechanism: To strengthen the redressal mechanism, the concerned entity shall review its redressal mechanism from time to time. The entity shall take immediate steps to resolve the complaint within 30 days of receiving it. Moreover, the complainant shall be made aware of all the actions taken by the entity in lieu of that complaint.

Electronically updation of ATR: The concerned entity shall update the ATR and other documents electronically in SCORES. Further, the reply to the complaint by the entity shall be uploaded on SCORES and preserved by them for future reference. The entity’s action will not be considered complete if the documents are not uploaded on SCORES.

Complaint treated as resolved: The complaint shall be treated as resolved only when SEBI disposes of such complaint in SCORES. Therefore, the mere filing of ATR will not imply that the complaint is not pending.

Failure to obtain SCORE user ID & password and failure to file ATR: Any failure to obtain SCORE User ID and Password will not only be treated as non-redressal of investor grievances but also be termed as wilful avoidance. Further, any failure to file ATR on SCORE will be treated as non-redressal of investor grievances.

Publishing of circular on the website: The depositories, stock exchanges and Association of Mutual Funds shall bring the provisions of this circular to the notice of registered stock brokers, listed companies, asset management companies and depository participants and shall also publish the same on their website.  

Conclusion

The SEBI, through the Current circular, has provided the liberty to the investor to approach SEBI through proper means. The redressal of investor grievances is considered to be the primary objective of SEBI in the process of fulfilling its commitments. To strengthen and enhance the speed of the resolution process, the SEBI has introduced an online redressal mechanism. Henceforth, to regulate the complaints transparently, the SEBI has mandated that the complaint be filed in the SCORE platform along with all the documents. Further, before consideration of the complaint by SEBI, the matter needs to be first redressed by the listed company, stock exchanges and MIIs.

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