Guidelines on Appointment of Compli...
The National Stock Exchange of India (NSE) issued a circular on 25th November 2022 stating t...
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 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.
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:
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:
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:
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.
The following types of complaints for redressal of investor grievances shall not be dealt with under the SCORES platform:
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.
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:
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.
The stock exchange shall handle the complaints in the manner provided below:
The stock exchange is the first resort for the following categories of complaints against a listed company:
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|
The procedure for handling complaints shall be as follows:
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:
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.|
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.
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.
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.1667823350700
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