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SEBI Expedites Investor Complaint Redressal Under SCORES

The Securities and Exchange Board of India (SEBI) recently issued a circular[1] on redressal of investor complaints through SCORES (SEBI Compliant Redressal System) and linking it to online dispute resolution platform. This is to enhance efficiency by reducing processing times and implementing automated routing and escalation mechanisms for addressing investor complaints against listed companies, registered intermediaries, or market infrastructure institutions.

The SCORES is a centralised facilitative platform which was introduced in the year 2011 to resolve the investor’s complaints against entities functioning in the securities market. SEBI has subsequently revised and strengthened the grievance redressal system on SCORES. These updated regulations for investor grievances are designed to ensure compliance with the revised SEBI (Facilitation of Grievance Redressal Mechanism) Regulations, 2023.[2]

Grievance Redressal Mechanism

The investors who wish to file a complaint must register on the SCORES portal under ‘Investor Corner’. The investors’ details, including PAN and contact details, are required for effective and speedy redressal communication. Additionally, the investors may complain against any entity within one year of the occurrence of the cause of action. SEBI may reject any complaint filed once the period of limitation is over. Moreover, certain complaints will not be dealt with via SCORES, such as complaints against delisted companies or companies on the Dissemination Board of Stock Exchange (except securities valuation complaints), matters before judicial or quasi-judicial or other dispute resolution forums, complaints under other regulatory bodies purviews, complaints against companies under resolution under the Insolvency and Bankruptcy Code, 2016, companies struck off from Register of Companies, liquidated companies and companies regarding market intelligence.

Complaints Redressal

Starting from December 4, the new framework requires that complaints submitted through SCORES be resolved within 21 days. These complaints are automatically sent to the relevant entity for resolution and designated bodies for monitoring. These bodies ensure that the entities submit an Action Taken Report (ATR) within 21 days, which is auto-routed back to the complainant. If the investor is still unsatisfied, they can request a review within 15 days of receiving the ATR.

First Review

If a review is requested or entities fail to submit the ATR within 21 days, the designated body overseeing the complaint takes charge of the initial review process via SCORES. The entity must submit the ATR within the stipulated time and provide the requested clarifications. The designated body reviews the revised ATR and sends it to the complainant within ten days. Moreover, SEBI shall take cognisance if intermediaries without designated bodies are appointed.

Second Review

Investors can request a second review within 15 days of receiving the revised ATR if they are still dissatisfied or if the designated bodies fail to submit it within ten days. In such cases, SEBI may handle the complaint for the second review via SCORES. SEBI engages with the entity and/or designated body for immediate action and ATR submission. The second review complaint is marked ‘closed’ or ‘disposed’ when SEBI completes its actions in SCORES.

Registration On Scores

SEBI provides an entirely automated procedure for generating a SCORES user ID and password for all SEBI-registered intermediaries and market infrastructure institutions (MIIs) recognised by SEBI post-August 2019. The SCORES user ID and password are sent via email provided in the online registration form and submitted through the SEBI Intermediaries portal. Brokers and Depository Participants are also required to obtain SCORES authentication.

Designated Bodies Authentication On SCORES

Designated Bodies must submit a Schedule IV form by sending it to scores@sebi.gov.in for SCORES Authentication from SEBI. The provided email address will receive the SCORES user ID and password. These Designated Bodies must assign a generic email ID for SCORES authentication and appoint a nodal officer whose details must be updated with SEBI via SCORES or email. Designated Bodies can contact SEBI at scores@sebi.gov.in to integrate their complaint redressal portal with SCORES via the Application Programming Interface (API). SCORES Authentication is required for all Designated Bodies, even API-integrated ones. Designated Bodies must have the infrastructure, systems, and manpower for compliance with the process laid down in this circular. They should also have procedures to prevent SCORES data leaks.

Designated Bodies must also maintain Management Information Systems (MIS) reports and share them with concerned entities to ensure timely Action Taken Reports. SEBI may request MIS reports in a specific format and at specific intervals as needed. SEBI can appoint or remove Designated Bodies for registered intermediaries as required.

Failure To Redress Investor Complaints By Listed Companies

The framework provides the Designated Stock Exchange (DSE) shall levy a fine of Rs.1000 a day per complaint on the listed company for violation to ensure expeditious redressal of investor complaints.[3] Fines will also be levied on companies suspended from trading on the Stock Exchange. The DSE will notify a listed company, informing them of the penalties imposed and directing them to submit ATR on pending complaints and pay fines within 15 days. If the company fails to comply with either, the DSE will notify the company’s promoters to ensure compliance within ten days. Failure to meet these requirements will lead depositories to freeze the promoters’ shareholding and other securities in their demat accounts. The depository will inform the promoters of the non-compliance. The DSE may take further action if the company still doesn’t resolve complaints or pay fines. The fine accrues monthly until the complaints are resolved, or the company is delisted. If there are over 20 pending complaints or the value exceeds Rs. 10 lakhs, the cases are forwarded to SEBI. Stock exchanges can deviate from this procedure with written reasons, and they must inform SEBI about the actions taken. The Stock Exchange must necessarily inform SEBI via SCORES of all actions taken against listed companies for non-compliance.

[1] https://www.sebi.gov.in/legal/circulars/sep-2023/redressal-of-investor-grievances-through-the-sebi-complaint-redressal-scores-platform-and-linking-it-to-online-dispute-resolution-platform_77159.html

[2] https://www.sebi.gov.in/legal/regulations/aug-2023/securities-and-exchange-board-of-india-facilitation-of-grievance-redressal-mechanism-amendment-regulations-2023_75419.html

[3] Regulation 13 (1) of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (LODR Regulations) read with SEBI circular no. SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020, https://www.sebi.gov.in/legal/circulars/jan-2020/non-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-and-the-standard-operating-procedure-for-suspension-and-revocation-of-trading-of-_45752.html