Online Dispute Resolution

Blog Credit: Trupti Thakur

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SEBI- Online Dispute Resolution

The Securities and Exchange Board of India (Sebi) has been making remarkable strides in safeguarding the interests of investors. To enhance the grievance redressal process, Sebi has announced the launch of an Online Dispute Resolution (ODR) mechanism, which aims to empower aggrieved investors to seek mediation and arbitration against various intermediaries. This revolutionary initiative is set to revolutionize the way disputes are handled in the financial market, providing a cost-effective and time-efficient alternative for resolution.

A new online dispute resolution (ODR) system involving institutions, conciliators and arbitrators for the capital market is on its way. On July 31, market regulator Securities and Exchange Board of India (Sebi) issued a circular, streamlining the existing dispute resolution mechanism in the securities market under the aegis of stock exchanges and depositories — Market Infrastructure Institutions — by establishing a common ODR portal. The new system will harness online conciliation and online arbitration for resolution of disputes arising in the securities market.

What are ODR institutions?

According to Sebi, each MII will identify and empanel one or more independent ODR institutions. These institutions will have qualified conciliators and arbitrators. MIIs will, in consultation with their empanelled ODR institutions, establish and operate a common ODR portal. All listed companies, specified intermediaries and regulated entities in the securities market (referred to as market participants) will enrol on the ODR portal.

Who can form ODR institutions?

Sebi has not specified who will qualify as ODR institutions. “Prima facie it looks like outsourcing of investor dispute resolution with the involvement of private ODR institutions,” said a market observer. “Should these ODR institutions be registered as companies or whether Sebi should register them? What will be the organisational structure of ODR institutions? It’s not clear,” he said.

Understanding the ODR Mechanism

The ODR mechanism, set to be introduced on August 15, seeks to widen the scope of the existing investor protection framework. Investors who were previously dissatisfied with the outcome of their complaints could approach the Investor Grievance Redressal Committee (IGRC). However, ODR will enable investors to initiate mediation and arbitration against a broader range of intermediaries, thereby making the process more comprehensive and inclusive.

 

Key Aspects of the ODR Mechanism

1. Role of SCORES:The Sebi complaint Redress System (SCORES) plays a crucial role in the dispute resolution process. Investors must first register their complaints on the SCORES platform, where they can escalate the matter in a time-bound manner.
2. Ambit of ODR:ODR will cover a wide array of intermediaries, including alternate investment funds (AIFs), investment advisors, mutual funds, portfolio managers, research analysts, and more.
3. Appointment of Conciliators and Arbitrators:Market infrastructure institutions (MIIs) like stock exchanges and depositories will appoint ODR conciliators and arbitrators to facilitate the resolution process for the clients.
4. Fee Structure:The ODR mechanism aims to provide an accessible resolution process for investors. While there won’t be any fees for registering a complaint on the ODR portal, the conciliator (mediator) will charge a fee of ₹4,800 for successful conciliation and ₹3,240 for unsuccessful conciliation.
5. Arbitration Proceedings:In case the matter is not resolved through conciliation, investors can initiate arbitration proceedings on the ODR portal. Arbitration fees will depend on the claim amount.

 

Impact and Future Outlook

Experts believe that the ODR mechanism will revolutionize dispute resolution in the financial market. It will significantly reduce costs and eliminate the need for lengthy court proceedings, encouraging more investors to access the framework for recourse. Furthermore, the mechanism will ensure a faster resolution process, enhancing investor confidence and trust in the market.

 

Blog By: Trupti Thakur