Sebi mulls ombudsmen to redress investor grievances

Capital market investors will heave a sigh of relief if the Securities and Exchange Board of India’s (Sebi’s) move to appoint ombudsmen for addressing their grievances comes through.

Despite there being several forums to address their complaints, investors are an unsatisfied lot either due to their lack of knowledge about those platforms or improper services provided by the intermediaries.

In this case, the ombudsman will be like a one-man court that will investigate and settle investor complaints. The Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority (Irda) have appointed ombudsmen, who are doing well.

At present, investors in the capital market have a few forums, besides consumer courts, to take up their complaints with. They can always complain to Sebi. If their complaints pertain to secondary market transactions, they can approach the arbitration department of recognised stock exchanges.

Appointing ombudsmen would be a significant move towards protecting investors’ interest as the proposed authority will have powers to deal with complaints against all kinds of intermediaries and even listed companies.

When contacted, a Sebi official said, “Regulations governing an ombudsman were in place for the last five years, but we have decided to operationalise those regulations now”.

As per the Sebi plan, the regulator will initially appoint ombudsmen in all its offices — in Mumbai, New Delhi, Chennai and Kolkata. Once the regulator opens its office in Ahmedabad, an ombudsman will also be appointed there.

Under the regulations, Sebi can appoint ombudsmen in other areas also. However, that is expected in the second phase.

Investors can approach the ombudsman only after they have tried to sort out their complaints with the intermediaries or listed companies directly but are not satisfied or their complaints have been rejected.

The ombudsman will have powers to seek information from companies/intermediaries relating to complaints and if not provided, s/he will draw the inference that had the required information been provided, that would have gone against the company/intermediary concerned.

An important provision in the ombudsman regulations is that complaints cannot be signed and argued by legal experts. This applies to companies/intermediaries also. Awards of the ombudsman can be challenges in Sebi only.

The regulations are quite old and may need to be reviewed. The appointment of the first ombudsman may take a few months as Sebi will take time to finalise various procedural aspects as provided under the regulations.