In order to further enhance the effectiveness of Investor Grievance Redressal System and Arbitration Mechanism at the stock exchanges, the Securities Exchange Board of India (SEBI) has mandated that clients getting favorable orders on their complaint against market operators will be suitably compensated even if process goes into arbitration and appeals.
In an amendment to its Investor Grievance Redressal System, the market regulator has now mandated that clients getting favourable orders would get 50 per cent of the admissible claim value or Rs 2 lakh, whichever is less, even if the members take the matter to arbitration.
For this to apply, the SEBI has said that the claim value admissible to the clients should not be not more than Rs 20 lakh. And all the money under this claim would have to be released to the client from investors protection fund (IPF) of the stock exchange.
As per the amended rules, in case the arbitration award is in favour of the client and the member opts for appellate arbitration, then a positive difference of 50 per cent of the amount mentioned in the arbitration award or Rs 3 lakh, whichever is less, and the amount already released to the client earlier shall be paid from the IPF.
In case the appellate arbitration award is in favour of the client and the member opts for making an application under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the appellate arbitration award, then a positive difference of 75 per cent of the amount mentioned in the appellate arbitration award or Rs 5 lakh, whichever is less, and the amount already released will need to be paid to the client.
In the revised process, the total amount released to the client through the facility of interim relief from the IPF will not exceed Rs 10 lakh in a financial year, the SEBI has said.
The move is expected to prevent client complaints from being locked into long-drawn arbitration without any immediate relief. The changes are also expected to prevent unnecessary arbitration and quicker settlement of grievances raised by clients. The SEBI said that changes would become effective from January 1, 2022.
The regulator has also advised the stock exchanges to make necessary amendments to the relevant bye-laws, rules and regulations to implement the changes.