SEBI Introduces Online Dispute Resolution In Indian Securities Market

This decision by SEBI comes after the implementation of the Securities and Exchange Board of India (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 on July 3, 2023. The amendment brought significant changes to the dispute resolution clause across various regulations concerning the securities market.

The SEBI ODR Circular provides a comprehensive framework that covers the entire dispute resolution process. It outlines the steps for initiating the process, the functioning of the ODR Portal and allocation system, procedures for arbitration and conciliation, the prescribed format of proceedings, the escalation process to ODR, as well as specific timelines for each stage. Additionally, the Circular also includes details about the costing of each process and emphasizes the importance of empanelment and training of the Panel of Conciliators and Arbitrators. Moreover, it defines the roles and responsibilities of Market Infrastructure Institutions (MIIs) and Market Participants during the dispute resolution process.

The SEBI ODR Circular facilitates the resolution of disputes related to securities market transactions through Online Dispute Resolution (ODR) institutions. These institutions are equipped to conduct time-bound online conciliation and/or arbitration, adhering to the provisions of the Arbitration and Conciliation Act, 1996, and leveraging online/audio-video technologies. The Circular sets guidelines for the selection and empanelment of ODR institutions, ensuring they maintain high-quality standards in their operations.

The Circular mandates the implementation of Online Dispute Resolution (ODR) in various types of cases, which encompass disputes involving Investors/Clients and listed companies, including their registrar and share transfer agents. Additionally, it applies to disputes involving specified intermediaries or regulated entities in the securities market. Both listed companies and specified intermediaries or regulated entities, as well as their clients or investors (including holders due to nominations or transmission), can utilize ODR to address unresolved service requests or service-related complaints.

According to the Circular, every Market Infrastructure Institution (MII) is required to associate with one or more Online Dispute Resolution (ODR) institutions. They must collaboratively establish and manage a unified Online Dispute Resolution Portal (ODR Portal) under the supervision of multiple MIIs. The ODR portal should be seamlessly connected to the SEBI SCORES portal/SEBI Intermediary portal.

Enrollment on the ODR (Online Dispute Resolution) portal is mandatory for all Market Participants, and they must complete this process within a specified timeline as mentioned in the Circular. Additionally, it is their responsibility to effectively inform investors/clients about the availability of both the SCOREs (Securities Commodity, and Options-related Dispute Resolution System) portal and the ODR portal. These portals serve as platforms for resolving disputes in case an investor/client is dissatisfied with the response or non-response from the Market Participant.

The ODR portal is equipped with various user-friendly features, including the ability to enroll both investors/clients and market participants. Users can easily file complaints through the portal and conveniently upload all the necessary documents and papers. Moreover, the ODR institution ensures that users are kept informed about the status of their complaints, providing timely updates.

Complaints or disputes initiated via the portal will be directed to an Online Dispute Resolution (ODR) institution that is accredited by a Mediation and Arbitration organization. The allocation of disputes among the empanelled ODR institutions will follow a market-wide round-robin system, ensuring fair and equitable distribution.

Conciliation

The Circular introduces a structured dispute resolution process on the ODR platforms, with Conciliation being the initial formal step. This process is fully funded by the MIIs (Market Infrastructure Institutions).

Upon receiving a complaint or dispute, the ODR institution is responsible for appointing a conciliator within five days.

The conciliator then has a period of 21 calendar days to conduct the conciliation process. This timeframe can be extended with the agreement of both parties involved.

In the event of a successful conciliation, a settlement agreement will be executed and stamped through an online mode, following legal guidelines. If the conciliation does not lead to a resolution, the conciliator will still provide their perspective on the "admissible claim value," which will serve as a reference point for any further dispute resolution efforts.

Arbitration

In cases where the conciliation process is unsuccessful, the investor/client or market participant may opt for online arbitration, which will be facilitated by the ODR institution responsible for the conciliation. The arbitration process can be initiated after the conclusion of the conciliation process, provided the matter has been resolved through conciliation. However, the parties will need to pay the relevant fees for online arbitration.

For market participants seeking online arbitration, they are required to deposit 75% of the admissible claim value with the relevant MII (Market Intermediaries Institution) before initiating the online arbitration. Additionally, they must fulfill the payment requirements for the arbitration process.

Once online arbitration is pursued, the ODR institution will appoint an independent and neutral arbitrator from its panel within 5 calendar days of receiving the reference. If the total claim value exceeds Rs. 30,00,000, the matter will be referred to an Arbitral Tribunal comprising three arbitrators.

It's important to note that once an arbitrator is appointed, the parties involved cannot withdraw from the arbitration process.

The appointed arbitrators are obligated to pass their award within 30 days of their appointment. For claims valued at ₹1,00,000 or below, the arbitration will be conducted on a documents-only basis, streamlining the process.

Form of Proceedings

The proceedings conducted by the ODR Institutions shall take place through online conciliation and arbitration. This enables all parties involved, including the investor/client, the Market Participant, and the conciliator or arbitrator, to participate through online audio-video communication. Additionally, the investor/client may also have the option to participate through the Investor Service Centers (ISCs) operated by any of the MIIs.

The location for the online proceedings shall be considered the place where the relevant MII has its registered office.

Circular No. SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/131

Date: 31.07.2023

Click Here To Read/Download Circular