Investor’s grievances against Listed Companies

The Exchanges forward the complaints to the respective companies and directs them to resove the grievances of the Investors’ within 15 days. In spite of the above efforts, if the company fails to resolve the Investors’ Complaints and the total number of pending complaints against the company exceed 25 and if these complaints are pending for more than 45 days, then steps are initiated to suspend the trading in the securities of the company till grievances of the investors are resolved after issue of show cause notice. (BSE may also transfer such Scrip’s to ‘Z’ category for non-resolution of Investors’ Complaints.)

Arbitration Procedure against Listed Companies

It is proposed that the transferee (investor) may make any claim, difference or dispute against a company for delay in transfer of securities and delay in furnishing of the objection memo beyond the specified time of 1 month from the receipt of the securities by the company. This shall be referred to and decided by arbitration under the Rules, Bye - Laws & Regulations of the Exchange.

The company shall be liable to compensate the aggrieved party for the opportunity losses, if any, caused during the period of the delay.

Grievance Redressal

There will be occasions when you have a grievance against the company in which you are a stake-holder. It may be that you have not received the share certificates on Allotment or on transfer, it may be that you did not receive the dividend/interest warrant or refund order, perhaps you did not receive the Annual accounts etc. You would first approach the company in that regard, you may not be satisfied with the company’s response there to. You would like to know whom you should contact to get your grievance redressed. The following table would provide you the guidance in this regard.

 

Investor Information Centres have been set up in every recognized Stock Exchange which in addition to the complaints related to the securities traded/listed with them, will take up all other complaints regarding the trades effected in the Exchange and the relevant Trading Member of the Exchange.

Investor Grievances – Rights and Remedies

Misleading advertisements

In certain cases publicity material, circulars, brochures are published by the companies, brokers or Intermediaries inviting applications from the public for subscription to shares/debentures. However, these publicity materials may not form part of the prospectus or letter of offer.

Grievance:
Investors have complaints against the advertisement, brochures, circulars which have exaggerated claim of the performance of the company. The above information circulated is marked “‘This is only an announcement and not a prospectus” or “Private circulation only. “This practice could be misleading to the investing public because it may contain the information not included in the Prospectus.

Rights and Remedies:

Companies Act :

In case of misleading advertisements, the investor may refer to Section 68 of the Companies Act and write to Department of Company Affairs (DCA). The investor can also seek remedy u/s.621.

Consumer Protection Act (COPRA) :
The investor can file complaints before the District Forum, State Commission or National Commission

SEBI :

The Investor can write to SEBI in case of misleading advertisements, circulars or brochures.

Delay in Payment of Interest on Debentures

Investors who would like to have fixed return by way of interest, normally invest in debentures on the assumption that the debentures are secured and risk free investments. Investors are advised to verify whether the company is healthy or sick and check the credit rating of the company before making such investments.

Grievance:

There have been instances where investors have complained of non-receipt or delay in the receipt of debenture certificates or interest thereon, non-appointment of Debenture Trustee or non-creation of the stipulated security.

Rights and Remedies:

Companies Act

In case of delay in payment of interest on debentures, the investor may refer to Section 118 & 119 of the Companies Act and write to the CLB.

The investor can also seek remedy u/s.433 & 434 by approaching the court.

SEBI :

Investors can write to SEBI and obtain redressal with regard to delay in payment of interest on debentures.

Non-Payment of Dividends

Dividends are declared by the company with the approval of the shareholders in its general meeting. Accordingly, a resolution declaring dividend payable by the company is passed. This becomes a debt due by the company to the shareholders.

Grievance:

In certain cases the shareholders complain of non-receipt of the dividend declared by the company.

Rights and Remedies:

Companies Act:

In case of non-payment of dividends, the investor may refer to Section 205A & 207 of the Companies Act and write to the DCA.

The investor can also seek remedy u/s.621.

SEBI :

Investors can write to SEBI and obtain redressal with regard to non-payment of Dividends.

Consumer Protection Act (COPRA) :

The investor can file complaints before the District Forum, State Commission or National Commission depending upon the jurisdiction of the claim involved.

Insider Trading

Insider is any person who accesses the unpublished price sensitive information of the company before it is available to the general public. Insiders may include corporate officers, directors, owners of firm, who may be having substantial interest in the equity of the company. They could also be neither corporate officers nor large shareholders, however, they may have access to non-public information due to their relationship with the entity.

Insider Trading is an act of buying and selling of securities by a person having unpublished price sensitive information (which is not available in the market) with the intention of making abnormal profits and avoiding losses. This price sensitive information includes dividend declaration, issue or buy back of securities, amalgamation, mergers or takeovers, major expansion plans, change of policies, etc.

SEBI is making all efforts to prevent insider trading and to build up investor confidence. It had set various committees in this regard and on their recommendations various regulations have been implemented to curb the insider trading.

Moreover, three other avenues are always available to the investors to seek redressal of their complaints which are through:

	Stock Exchange: The investor can bring to the notice of the Stock Exchange where the Securities of companies are listed.
	Complaints with Consumer’sDisputes Redressal Forums
	Suits in the Court of Law.

Investor’s grievances against Trading Member

The nature of complaints received by the Exchange against its Trading Members can be broadly classified into the following categories:

	Non-receipt of delivery of shares/ Non removal of objection/Non-receipt of sale proceeds of shares/ Non-receipt of dividend/ Non-receipt of Rights, Bonus shares
	Disputes regarding Rate Difference
	Disputes relating to non-settlement of Accounts
	Miscellaneous Items

Valid complaints supported by necessary documents are forwarded to the concerned Trading Member to reply /settle the complaints within 7days from the receipt of the letter. If no reply is received or reply received is not satisfactory, the matter is placed before the Investors’ Grievance Redressal Committee (IGRC) headed by a Retd. High Court Judge. IGRC is constituted by the Governing Board to resolve the Complaints of non-members against Trading Member through the process of reconciliation. The parties are heard and the matter is tried to be solved amicably or it is referred for Arbitration under the Rules, Bye-laws & Regulations of the Exchange.

Arbitration

The Investors complaints referred by IGRC can be against the (i) active Trading Member of the Exchange as well as the (ii) defaulter - Trading Member of the Exchange. The process of solving the Investors’ complaints through the arbitration procedure is as mentioned below:

Arbitration Procedure

For the purpose of resolution of grievances between Investors and Member-brokers, the Exchange has constituted an Arbitration Panel. The Arbitration panel consists of retired High Court and City Civil Court judges, Chartered Accountants, Company Secretaries, Solicitors and other professionals having in-depth knowledge of the capital market, law and finance.

On receiving the direction for arbitration from the IGRC, the complainant (applicant) files relevant supporting documents for arbitration. A set of the arbitration documents is sent to the other party (respondent) for giving his counter reply. As per the Rules Bye laws and Regulations of the Exchange any claim has to be filed within 6 months from the date of the transaction or from the date on which the client claims to have paid money or given a security, whichever is earlier.

After completion of the formalities, the matter is fixed for hearing before arbitrators. For claims less than Rs. 10 lakhs, the applicant(s) has/have to propose the name of three arbitrators and the respondent(s) has/have to consent on the name of one of the arbitrators. In case the respondent(s) does/do not consent on the arbitrator, the Exchange appoints the arbitrator to adjudicate the matter. For claims above Rs. 10 lakhs, a panel of three arbitrators, one each to be appointed by the applicant(s) and respondent(s) and the presiding arbitrator has to be appointed by the Exchange to adjudicate the matter.

The date for hearing is fixed and the concerned parties are informed about the date through notices. After hearing both the parties and taking the submissions and the documents on record, the arbitrator(s) close the reference and the award (decision) is given.

Appeal

If the applicant is not satisfied with the award he can appeal against the same in the Exchange within 15 days of the receipt of the award. The appeal bench of five arbitrators hears the matter and gives the award.

However, the aggrieved party has to deposit the amount as per the award given by the Arbitral Tribunal with the Exchange. In case if Award is against Trading Member and if the time for making payment of the amount awarded, as set out in the award, has expired then the same is set aside from the Trading Members security deposit /other monies held by the Exchange and is credited to a separate escrow account in the name of the award holder. The amount is released to the award holder if the award is not challenged within the specified period.

The award becomes a decree after expiry of 90 days from the date of the receipt of the award by the concerned party and can be executed as a court decree through a competent court of jurisdiction.

Arbitration Procedure against Defaulter Trading Member of the Exchange

Any claim against defaulter Trading Member of the Exchange can directly be filed in arbitration. However, the same has to be filed within 6 months from the date of declaring the Trading Member as defaulter by the Exchange. The rest of the process is the same as above.

An award obtained against a defaulter Trading Member is scrutinized by the Defaulters’ Committee (DC), a standing committee constituted by the Exchange, to ascertain the genuineness, etc. The awarded amount or Rs. 10 lakhs whichever is lower is paid from the Investors Protection Fund (IPF) provided the claim is covered by the rules of IPF. After the approval of the DC & Trustee of IPF, the amount is distributed to the clients who have obtained the award against a defaulter Trading Member

Investors Protection Fund (IPF)

The Exchanges have an Investors Protection Fund (IPF) in the interest of the clients of the defaulter Trading Member of the Exchange. The Exchange offer a maximum compensation upto Rs.10 lakhs in respect of the approved claims of any Investor against the defaulter Trading Member of the Exchange.

The Trading Member at present contribute 1 paisa per 1 lakh of gross turnover. The Stock Exchange contributes 2.5% of the listing fees collected by it. Also the entire interest earned by the Exchange on 1% security deposit kept with it by the companies making public / rights issues is credited to the Fund.

Trade Guarantee Fund (TGF)

In order to introduce a system of guaranteeing settlement of trades and ensure that market equilibrium is maintained in case of payment default by the Trading Member the Trade Guarantee Fund has been constituted at the Exchanges. The main objectives of the fund are as given below: