When and How can you file a complaint at SEBI?

Introduction to SEBI

At the end of the 1970s and during The 1980s, capital markets were rising as the new sensation among the individuals of India. Due to the sudden rise, many malpractices started taking place at that period of time such as fixation of prices, not adhering to the provisions of the Companies Act, violation of rules and regulations of the Stock Exchange, etc. Just because of these malpractices, people started losing confidence in the stock market. Then the government felt that something should be done in order to stop these malpractices and to set up an authority to regulate the working. Therefore, the government came up with the establishment of SEBI.

On April 12, 1988, the Securities and Exchange Board of India (SEBI) was officially appointed as the authority for regulating the financial markets in India. It is a statutory corporation, having perpetual succession and a common seal of its own. Further, being a body corporate it has its separate legal entity and rights to sue and be sued.

The basic function or SEBI’s purpose is explained within its Preamble “to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto.”

SEBI plays an important role in order to regulate and develop the Indian capital market and to protect the interest of investors from being deceived or being put to loss by the companies in the capital market. It acts as a watchdog of the capital market and looks out for everyone in the market. Its main purpose is to provide an environment for the financial market enthusiasts that facilitate the efficient and smooth working of the securities market, protection of investors in securities as we the investors are the ones who keep the market active and prevent any kind of malpractices in the securities.

It ensures investors protection by taking following measures:

• Display of rights and obligations of investors by stock brokers.
• Mutual Fund business has been opened to the private sector.
• Internal audit to be done by the Depository Participants.
• Companies are required to undergo a secretarial audit.
• In all the capital market transactions the (PAN) Permanent Account Number has been made mandatory.

What is SCORES?

SEBI also acts as a grievance redressal forum for the investors, and for which it has launched a web-based complaints redress system SEBI Complaints Redress System (SCORES) on June 3, 2011. The main purpose of SCORES is to provide a platform for aggrieved investors are known to be loss-making investors, whose grievances, pertaining to securities market remained unresolved by the concerned listed companies or registered intermediary after a direct approach. 

The objective of SCORES are:

• To have a centralized database of investors’ complaints.
• The online movement of complaints to the concerned listed company or SEBI registered intermediary;
• Online upload of (ATRs) Action Taken Reports by the concerned listed company or SEBI registered intermediary; and
• Online reviewing by investors of action taken on the complaint and its current status.

If we talk about complaints then, they can be filed against a listed entity or an intermediary that is registered. Any investor has an issue then, he/she may file a complaint which comes under the purview of SEBI Act, Securities Contract Regulation Act, Depositories Act and its rules and regulation and the relevant provisions of the Companies Act, 2013 through SCORES.

Against whom we can file a complaint on SCORES?

• Mutual Funds.
• Merchant Bankers.
• Stockbroker/Authorized Agent/Stock Exchange.
• Custodian of Securities.
• Portfolio Managers.
• Denture Trustees.
• Depository and Depository Participant.
• Registrar to an Issue/Share Transfer Agent.
• Banker to an Issue.
• Collective Investment Scheme.
• KRA Registration Agency.
• Credit Rating Agency.
• Investment Advisors, etc.

Matters which cannot be considered as complaints in SCORES?

• Any complaint not relevant to an investment in the securities market.
•  Anonymous Complaints (except whistleblower complaints).
• Complaints that are incomplete or un-specific.
• Allegations without supporting documents.
• Asking for suggestions or seeking guidance/explanation.
• Not satisfied with the trading price of the shares of the companies.
• Non-listing of shares of the private offer.
• Disputes arising out of private agreement with companies/intermediaries.
• The matter involving fake/forged documents.
• Complaints on matters not in SEBI purview.
• Complaints about any unregistered/ un-regulated activity.

Complaints against the following companies are not dealt on SCORES:

• Companies that are unlisted/delisted, placed on the Dissemination Board of Stock Exchange.
• Against a sick company or a company where a moratorium order is passed in winding up / insolvency proceedings.
• The companies where the name of the company is struck off from Registrar of Companies (RoC) or a Vanishing Company as per list published by Ministry of Corporate Affairs (MCA).
• Suspended companies, companies under liquidation, BIFR, etc.
• Complaints that are sub-judice.
• Falling under the purview of other regulatory bodies such as, the Reserve Bank of India (RBI), The Insurance Regulatory and Development Authority of India (IRDAI), etc., or under the purview of other ministries like MCA, etc.

Details that are required, while lodging a complaint on SCORES

While filling up the form, the following details are to be given:

• Your NAME,*
•  E-mail Address* for receipt of acknowledgment letter/ updates,
• Address of correspondence,*
• City/location with pin code,*
• State/UT,*
• PAN Number,*
• Mobile/ Landline Number,
• Aadhar Number, (optional),
• CKYC Id,(optional),
• Bank Account Number of the Investor,
• Bank Name,
• Bank IFSC Code.

(*) are mandatory fields.

Procedure to lodge a complaint with SCORES

From August 01, 2018, it has been made mandatory to register on SCORES for lodging a complaint.

• To become a registered user the complainant need to register online on the SCORES portal, (http://scores.gov.in) click on “Complaint Registration” under “Investor Corner” on the left-hand side of the portal.
• The Complaint Registration Form contains personal details and complaint details.
• There are certain mandatory fields in the form. These fields include Name, Address for Correspondence, State, Email Id of an Investor.
• After filling in the personal details, select the complaint category, entity name, nature of complaint related to complaining details in brief (up to 1000 characters).
• A PDF document (up to 2MB of size for each nature of complaint) can also be attached along with the complaint as supporting document.

On successful submission of the complaint, the system generates a unique registration number which will be displayed on the screen and it is to be noted for future correspondence. An email with a text message regarding the complaint with its registration number will be communicated instantly.

How are the complaints filed by an investor handled?

Sometimes what happens is that, investors rather than first taking the matter to the concerned company/ intermediary, they frequently lodge the complaints on SCORES. So, in view of the same, from August 01, 2018, complaints will be handled as follows:-

At the time of lodging of the complaint, the investor is asked “Have you lodged a complaint with the concerned intermediary / listed company for redressal of your complaint?”

If the investor clicks on the “NO” option then

• The complaint will be directly sent to the concerned entity as “direct complaints”. And it will be handled by them without the interference of SEBI officials.
• Within 30 days of the “Direct complaint,” the concerned entity is required to send a response to the investor.
• And if the concerned entity fails to send a response within 30 days to the investor, then the complaint will be routed to SEBI automatically. And a new SCORES registration number would be generated.
• In case the investor is dissatisfied with the redressal of the complaint, the investor has to inform the same against the complaint, and then the complaint will come to SEBI. If the investor fails to inform the SEBI regarding the dissatisfaction within 15 days of receipt of reply from the company, it will be assumed that he/she is satisfied and the complaint will be closed.
• If the investor clicks on the “YES” option then-The complainant has to provide the date of lodging the complaint with the company and also the address where the complaint was sent and automatically the complaint will be routed to SEBI.

How complaints are referred, settled and the time period

When the complaint comes to SEBI, the complaint is examined thoroughly and it’s decided whether the subject matter falls within the scope of SEBI and whether it needs to be referred to concerned entity. After examination, SEBI forwards the complaint to the concerned entity and guiding them to send a written reply to the investor and file an ACR (action taken report) in SCORES within a reasonable period but not later than 30 days.

Sometimes what happens in some cases, the entity or company denies their wrongdoing, and it remains unsettled as to who is wrong or any wrongdoing occurred at all. In these circumstances, SEBI cannot be considered as a judge or an arbitrator and force an entity/ the company to resolve the matter. Also, it cannot act as a personal representative or an advocate. Therefore, an advantage to an investor is given, and it is to take legal action on their own by knocking on the doors of the courts, consumer courts, or arbitration. To take advantage of this plus point, the complainant must take legal action swiftly or they can lose the right to recover funds. Further, it may be noted that as per the “law of limitations”, there are some time periods within which court proceedings should be proposed.

For the investors, if an advantage has been provided then, that advantage comes with a limitation i.e., a timeline for lodging complaint on SCORES. From the date of August 01, 2018, an investor may lodge a complaint in SCORES within 3 years from the date of cause of the complaint, where the investor has approached the company/ intermediary for redressal of the complaint and, the very same complaint is rejected by the company/ intermediary or, the complainant does not receive any kind of communication from the company/ intermediary or, he is not satisfied by the reply or the redressal action taken by them. In such a case, if an investor fails to lodge a complaint within the stipulated period of time, he may directly take up the complaint with the entity concerned or may approach an appropriate court of law.

SEBI can also take action when there is failure on the resolution of an investor complaint.SEBI has permitted stock exchange to impose fine on listed companies for non-redressal of investor complaints in terms of the relevant provisions of SEBI (Listing and Disclosure Requirements) Regulations, 2015 to be read with SEBI circular SEBI/HO/CFD/CMD/CIR/P/2018/77 dated 03 May 2018. If the fine is not paid or the complaint of the investor is not redressed, the stock exchange can direct the depositories to freeze the entire shareholding along with other securities held in the Demat account of promoters and their group. Still, non-compliance continues, the stock exchanges may refer such cases to SEBI for taking actions, if any. In spite of the above mentioned, the entity is directly responsible for redressal of investor complaints, SEBI can initiate action against such fractious entities including registered intermediaries and listed companies on the grounds of their failure to redress investor complaints.

What happens when a complaint is received by an Investor against the Stock Brokers, Sub-Brokers, and Depository Participants?

It is mandatory for every registered intermediaries and listed companies to take SCORES authentication, except the stockbrokers, sub-brokers, and depository participants. Therefore, when an investor’s complaint is received against any of the mentioned above, they are forwarded to the aforesaid intermediaries by SCORES through the platforms of Stock Exchanges and Depositories rather than, routing it to respective entities.

However, in the case of other intermediaries/ companies, investor complaints are directly forwarded by SCORES to the entities, which ultimately entail obtaining SCORES authentication. And the process for this authentication does not impose or levy any kind of cost i.e. it is absolutely free of cost.

Conclusion

It can be concluded that SEBI has been in fact, constituted for the purpose of investor’s protection by imposing certain rules and regulations for their welfare and also, in order to promote the development and to regulate the security market in India. Every year SEBI receives a large number of complaints and especially, since the day when SCORES[1] came into force. Being an online platform, they are trying their best in order to regulate the market by preventing any kind of malpractices in order to ensure that everyone adheres to the rules and regulations imposed and side by side to resolve the matters timely in order to keep the trust of investors as their main priority.  

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[1] https://scores.gov.in/scores/Welcome.html

This article is authored by Pratibha Vyas, student at the Lloyd Law College, Greater Noida.