The Securities and Exchange Board of India (“SEBI”) issued circular no. SEBI/HO/OIAE/IGRD/CIR/P/2020/152 on August 13, 2020 (“Circular”) on 'Investor grievances redressal mechanism'. The Circular lays down the procedure for handling complaints by the stock exchanges as well as standard operating procedure for actions to be taken against listed companies for failure to redress investor grievances.
On June 8, 2011, SEBI commenced a web based centralized grievance redress system called as SEBI Complaints Redress System (“SCORES”). SCORES is a platform designed to help investors to lodge their complaints online with SEBI, pertaining to securities market, against listed companies, SEBI registered intermediaries and SEBI recognized Market Infrastructure Institutions.
Under the framework, exchanges can levy penalty on companies in case of non-redressal of investor complaints and ask depositories to freeze the shareholding of the promoter entities.
The procedure and action mentioned in the Circular are applicable for certain categories of complaints listed in Annexure 2 of the Circular. These include non-updating of address or signature, non-receipt of bonus, dividend, interest for delay in dividend, duplicate debt securities certificate and share certificate etc.
Companies are expected to resolve investor complaints within 30 days from the receipt of such complaint. In case the company fails to do so, such direct complaints shall be forwarded to Designated Stock Exchange (DSE) through SCORES.
According to the Circular, for any failure to redress investor grievances pending beyond 60 (sixty) days by listed companies, the stock exchange shall levy a fine of Rs. 1,000 (Rupees one thousand) per day for non-redressal of complaint. In case if the listed company fails to pay the penalty and/or resolve the complaint within 15 (fifteen) days, the stock exchange can send a reminder to allow 10 (ten) more days to do the needful. If the company still fails to submit an Action Taken Report (ATR), the depository shall immediately freeze the promoters' demat accounts.
Once stock exchange(s) has exhausted all options and if number of pending complaints exceed 20 (twenty) or the value involved is more than Rs. 10 lac, stock exchanges are required forward the complaints against such listed companies to SEBI for further action, if any.
The Circular will come into force on September 1, 2020.
Please find a copy of the Circular here.
This update has been contributed by Adity Chaudhury (Partner) and Aditi Gupta (Associate).
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