BlogInvestment Adviser Level 120. Grievance Redress Mechanis...

20. Grievance Redress Mechanism

Consumer Protection and Investor Grievance Redressal Mechanism

Consumer Protection Act:

  • Enacted in 1986 to protect consumer interests
  • Establishes consumer councils and other authorities to settle consumer disputes
  • Defines a consumer as anyone who buys goods or hires services for consideration
  • Excludes those who obtain goods for resale or commercial purpose

Investor Grievance Redressal Mechanism:

  • Provides mechanisms for investors to address grievances related to financial transactions
  • Grievances can be related to accuracy and extent of information, fees and expenses, delayed or unattended service requests, etc.
  • First line of action is to approach the product or service provider to resolve the grievance
  • If not resolved to satisfaction, investor can approach the respective industry regulator.

Grievance Redress System

A robust grievance redress system ensures that investors can get their problems addressed in a timely manner. The system should cover various features such as source of receipt of complaint, nature of complaint, escalation mechanism, status of resolution/action taken, time taken for resolution, etc.

  1. Source of Receipt of Complaint
  • Relevant complaints under acts or regulations related to investors should be addressed
  • This ensures that only the right complaints are addressed

2. Date and Time of Receipt of Complaint

  • Complaints should be received within a specific time period mentioned in relevant acts
  • Maintains a balance in terms of the time period for which complaints will be entertained

3. Nature of Complaint

  • Complaints should be relevant and fall under the definition of a complaint
  • Eliminates frivolous complaints and focuses on relevant ones

4. Internal/External Escalation

  • First port of landing for complaint is the internal system of the entity against whom complaint is made
  • If complaint cannot be resolved internally, it is escalated to an outside agency

5. Status of Resolution/Action Taken

  • Investors should be able to see progress made on the complaint
  • Increases confidence of investors in the system

6. Time Taken for Resolution (or Ageing Report)

  • Complaints should be resolved within a specific time period for closure
  • Prevents erosion of confidence in the system

7. Escalation Mechanism

  • Allows investors who are not satisfied with the handling of the complaint to escalate it
  • Provides an independent party to look at the facts and decide on the complaint

Grievance Redress System for Investment Advisers

Investment advisers are required to have a robust grievance redressal system in place to address any grievances that their clients may have.

Display of Details:
Investment advisers are required to display the details of their compliance officer, CEO/Partner, and Proprietor’s name, address, email, and phone number in their offices. This helps clients to easily reach out to the relevant authority in case of any grievances.

Lodging of Grievances:
If a client is not satisfied with the response of the investment adviser, they can lodge their grievances with SEBI (Securities and Exchange Board of India) through the SCORES (SEBI Complaints Redress System) system. This ensures that an independent authority looks into the matter and provides a fair resolution to the complaint.

Grievance Redress System in Capital Market

  • SEBI has put in place various measures for investor protection in the capital market
  • Investors can approach the Investor Services Centre (ISC) of the stock exchange for grievances related to transactions
  • The arbitration mechanism of the stock exchange is available for quasi-judicial settlement of disputes
  • Investor facilities are available at various centres across the country
  1. Delegated Redressal Mechanisms
  • Delegated redressal mechanisms have been put in place
  • Investors can approach the ISC for grievances against trading members or listed companies

2. Types of Complaints

  • Complaints against members of the stock exchange can be related to non-receipt of funds or securities, execution of trades without investor consent, higher brokerage than what is permissible, and other trading-related issues
  • Complaints against listed companies can be related to non-receipt of securities or refunds or interest related to offers made in the primary market, non-receipt of dividends, bonus or rights shares, interest and redemption amount on debentures, or complaints related to the dematerialisation or transfer of securities

3. Online Complaint Registration

  • Complaints can be registered online on exchange websites
  • If the complaint is not resolved to the investor’s satisfaction, it gets referred to the IGRP

4. Investor Grievance Resolution Panel (IGRP)

  • The IGRP gives an opportunity to both parties to present their case and tries to broker a settlement
  • If that fails, the complainant has the option to seek arbitration in the matter

5. Grievance Redressal in Mutual Fund Investments

  • The Board of Trustees of the mutual fund can be approached if the investor finds that queries are not resolved by the asset management company
  • The offer document of mutual fund schemes provides data on the number of complaints received by the mutual fund and those that are not yet redressed
  • In extreme cases, SEBI does not permit the mutual fund to launch new schemes

6. Approach to SEBI

  • If the specific company or intermediary against whom the investor has a complaint does not respond, or if the response is unsatisfactory, the investor can approach SEBI

Grievance Redressal Mechanisms in Capital Market

Investor Protection Measures by SEBI

SEBI has put in place various measures for investor protection, including redressal mechanisms, to handle complaints against companies, intermediaries, and securities-related products. These grievance redressal mechanisms aim to ensure that investors’ complaints are dealt with promptly and efficiently.

SCORES – Online Investor Redressal Mechanism

SEBI’s Redressal Mechanism for All Regulated Entities

SCORES is the online investor redressal mechanism created by SEBI to handle complaints related to all products and entities regulated by it. The platform is designed to facilitate the registration of complaints against intermediaries, companies, and service providers such as brokers, depositories, and financial advisors.

Limitations of SCORES

SEBI has set certain limitations on the complaints that can be addressed through SCORES. Complaints that are incomplete, not specific, or do not have supporting documents are not entertained. Complaints against unlisted, delisted, wound-up, liquidated, or sick companies are also not addressed.

Escalation of Grievance

SEBI has laid down a procedure for handling complaints by the stock exchanges as well as standard operating procedures for actions to be taken against listed companies for failure to redress investor grievances. The first recourse for certain categories of complaints against listed companies is the stock exchanges, and investors are encouraged to approach the concerned company directly for redressal. If the company does not resolve the complaint within 30 days, it is forwarded to the Designated Stock Exchange through SCORES.

Grievance Redress System in Banking

Customer complaints are inevitable in every business, particularly in the banking industry due to its service-oriented nature. To minimize customer grievances and ensure prompt redressal, a grievance redressal system is essential

Grievance redress system with individual banks:
The Reserve Bank of India (RBI) has established the Banking Codes and Standards Board of India (BCSBI), an independent watchdog, to guarantee fair treatment for customers in their dealings with banks. The BCSBI has published the “Code of Banks’ Commitments to Customers,” which outlines minimum banking standards and benchmarks for customer service that banks must adhere to. Most banks have voluntarily adopted this code as their Fair Practice Code for customer dealings. Each bank has a customer redressal department that handles customer complaints. Customers can file complaints with this department. If they are not satisfied with the response, they can approach the banking ombudsmen appointed by the RBI in various locations across the country.

Banking Ombudsman:
The RBI appoints a Banking Ombudsman to handle complaints from banking customers regarding the services provided by banks. The ombudsman also hears complaints related to credit cards issued by banks and non-banking finance companies (NBFC). Customers can approach the ombudsman if their grievance has been directly addressed to the bank, but they have not received a satisfactory resolution within one month. The ombudsman is the redressal forum for complaints against the services of a bank for receipt and payment of funds to and from the account holder’s account. Disputes related to interest charged or credited, penalties or fees charged, disputes related to ATM cards, debit cards, credit cards, issues of refusing a loan without valid reasons, and others may also be referred to the ombudsman. The complaint can be filed online, through email, or physically at the office. Details, including the name and address of the ombudsman concerned, are available at every bank branch. If the complaint is valid, the ombudsman will attempt to settle it with the concerned bank. If a settlement does not happen within one month, the ombudsman will pass an award after giving both sides a chance to state their case.

Process regarding escalation of grievance:
The process for escalating grievances involves first approaching the respective banks, wherein there is typically a three-tier complaint resolution system – Branch Manager, Zonal Manager, and GM-Customer Service. If the complainants are not fully satisfied with the redressal or disposal of complaints, they may approach the concerned Banking Ombudsman for settlement of their grievances through mediation and passing of awards within a time frame. The grievances received in the department online or by post/manually in the department are processed and forwarded through CPGRAMS (Centralized Public Grievance Redress and Monitoring System) to concerned organizations for resolution or disposal, monitored, and periodically reviewed. According to the guidelines and instructions of DARPG, the maximum time limit for resolving a grievance is 60 days. The portal is accessible at www.pgportal.gov.in.

Grievance Redressal in Insurance:

Grievance redressal is an essential part of the insurance sector to ensure customer satisfaction. Here are the different stages and mechanisms involved in grievance redressal:

  1. Grievance redressal mechanism of the insurance company:
  • A complainant approaches the grievance redressal mechanism of the insurance company first.
  • Grievance or complaint is defined as any communication expressing dissatisfaction about an action or lack of action about the standard of service/deficiency of service of an insurance company and/or any intermediary or asks for remedial action.
  • An insurance company is required to resolve a grievance within 2 weeks of its receipt.

2. Role and functioning of Insurance Ombudsmen:

  • If the complaint is not resolved within 2 weeks of its receipt or the customer is unhappy with the insurance company or intermediary associated thereto, the complainant can approach the Insurance Ombudsman.
  • The Ombudsman is a person appointed by the Government of India under the Redressal of Public Grievance Rules, 1998.
  • The Ombudsman takes up a complaint for settlement through mediation if both the complainant and insurance company, by mutual agreement, request for the same in writing.
  • If the settlement by recommendation does not work, the Ombudsman will dispose of the complaint by passing a speaking Award within 3 months from receipt of complaint.

3. Escalation of grievance:

  • If the grievance is not addressed satisfactorily, it can be escalated to IRDAI through the IGMS.
  • IRDAI offers the facility of online registration of policyholders’ complaints through its Integrated Grievance Management System (IGMS) on its website.
  • If the complaint is registered other than through the IGMS, the same will be forwarded to the insurer for resolution.
  • IRDAI’s regulations require a complaint to be resolved within 15 days.
  • If the complainant is not satisfied with the resolution provided by the insurer, they can approach the Insurance Ombudsman for relief.
  • If the insurance buyer is not happy with the decision of the ombudsman, then the normal judicial process through courts as well as under the Consumer Protection Act, 1986 is available.

Redressal Mechanisms for Pension Sector Grievances

The pension sector is regulated by various authorities, and it is essential to have an efficient grievance redressal system in place. In this note, we will discuss the redressal mechanisms for pension schemes issued by mutual funds and insurance companies, as well as the National Pension System (NPS)

I. Redressal of grievances for pension schemes issued by mutual funds and insurance companies:

  • Pension schemes issued by mutual funds are regulated by SEBI, and the redressal system specified by SEBI, i.e., SCORES, must be followed.
  • Pension schemes issued by insurance companies are regulated by IRDAI, and their grievance redressal system should be followed.

II. Redressal of grievances for the National Pension System (NPS):

  • The NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
  • NSDL e-Governance Infrastructure Limited is the Central Recordkeeping Agency (CRA) appointed by PFRDA for the NPS.
  • A subscriber to the NPS can raise a grievance with the CRA through their website.
  • Grievances or complaints include any communication expressing dissatisfaction in respect of the conduct or any act of omission or commission or deficiency of service on the part of an intermediary or an entity.
  • Complaints that are incomplete or not specific in nature, offering suggestions, seeking guidance or explanation, or beyond the powers and functions of the PFRDA or the provisions of the PFRDA Act and rules and regulations framed thereunder are not considered grievances.
  • Complaints that are subjudice (under consideration by a court of law or quasi-judicial body) except matters within the exclusive domain of the PFRDA under the provisions of the Act are also not considered grievances.
  • The resolution mechanism for grievances is through a call centre or written communication.
  • A Grievance Redressal Officer (GRO) is appointed by NSDL e-Governance Infrastructure Limited for the NPS.
  • If the complainant is not satisfied with the redressal of their grievances or if it has not been resolved by CRA within thirty days of the filing of the complaint, they may escalate the grievance to the NPS Trust.

III. Escalation of grievances to NPS Trust:

  • The NPS Trust shall follow up the grievance with the intermediary for redressal of the subscriber grievance.
  • The NPS Trust shall call for the resolution of the subscriber grievance and respond to the subscriber within thirty days from the date of receipt of the grievance under this sub-regulation, about the resolution of the grievances.
  • If the subscriber’s grievance has not been resolved by the intermediary within thirty days from the date of submission of the grievance to the National Pension System Trust, or if they are not satisfied with the resolution provided by the National Pension System Trust, they can prefer an appeal to the Ombudsman against the concerned intermediary or entity.

Securities Appellate Tribunal and Other Redressal Fora

The Securities Appellate Tribunal (SAT) is a quasi-judicial body established under Section 15T of the SEBI Act. It has been given the power to hear appeals against orders passed by SEBI, the IRDAI, and the PFRDA. Additionally, there are other redressal fora available to investors for specific complaints related to non-repayment of deposits or payment of interest by NBFCs.

Securities Appellate Tribunal:

  • SAT is guided by principles of natural justice and has powers to regulate its own procedures.
  • It has powers similar to a civil court while trying a suit, including summoning persons, examining them on oath, and requiring the discovery and production of documents.
  • Any proceeding before the SAT is deemed to be a judicial proceeding under the Indian Penal Code.
  • Appeals to the SAT can be made within 45 days of receiving an order from SEBI or adjudicating officers.
  • Appeals against SAT decisions can be filed with the Supreme Court within 60 days of receiving the decision.

Other Redressal Fora:

  • Complaints related to non-repayment of deposits or payment of interest by NBFCs can be registered with the NCLT or the Consumer Forum.
  • The complaint must be in the prescribed form specified under the NCLT Rules for the company’s registered office’s area.
  • Complaints related to non-repayment of deposits by companies or bonds and debentures issued by unlisted companies can be filed on the Ministry of Company Affairs’ website.

 

 

 

 

 

 

 

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