Sebi Mulls Overhaul of Online Dispute Resolution Framework; Seeks Public Comments till Aug 13

Markets regulator Sebi on Thursday proposed a revamp of the Online Dispute Resolution (ODR) framework for the securities market, including shifting the responsibility of dispute resolution from ODR institutions to Market Infrastructure Institutions (MIIs), to make the system more efficient and investor-friendly.

Under the proposal, stock exchanges, depositories and clearing corporations (MIIs) will operate the technology-driven online conciliation and arbitration platform, besides handling the empanelment and appointment of conciliators and arbitrators.

Sebi said it received feedback from MIIs, investors and other stakeholders highlighting issues in the existing ODR framework, including delays in appointment of arbitrators, payment to arbitrators, enforcement of arbitration awards, and procedural bottlenecks.

To address these concerns, the regulator has proposed incorporating certain features of the pre-ODR mechanism, under which MIIs had greater control over empanelment and administration of conciliators and arbitrators.

"The MIIs have better control and enforceability over the intermediaries and listed entities and most of them are registered with MIIs in some capacity. Therefore, it is proposed to shift the responsibility of handling of the dispute resolution from the ODR institutions to MIIs," the regulator said in its consultation paper.

Sebi also proposes giving both disputing parties an opportunity to indicate their preferred arbitrators from an approved panel before the MII makes the final appointment. Conciliators, however, will continue to be appointed by MIIs from their empanelled list.

In another measure, Sebi has proposed allowing investors in Alternative Investment Funds (AIFs) to choose an alternative dispute resolution mechanism, if such an arrangement already exists under agreements between the parties, instead of mandatorily using the ODR platform.

Further, the regulator has suggested streamlining the grievance redressal process by allowing unresolved investor complaints under the Sebi Complaints Redress System (SCORES) to move directly from the review stage by Designated Bodies to the conciliation stage under the ODR framework.

Sebi said this is expected to reduce the overall dispute resolution timeline by 21 calendar days.

Separately, Sebi has proposed amending the AIF Regulations to extend protection available to investors' money held in trust against liabilities arising from dispute resolution to all AIFs, irrespective of whether they are structured as trusts, companies or limited liability partnerships (LLPs).

At present, such protection is available only to AIFs constituted as trusts.

Also, Sebi suggested that disputes involving claims above Rs 30 lakh would be decided by a three-member arbitral tribunal, while lower-value cases would continue to be heard by a sole arbitrator.

Sebi has also proposed allowing investors to seek interim relief of up to 50 per cent of the award amount or Rs 5 lakh, whichever is lower, if a regulated entity challenges an arbitration award.

Both investors and regulated entities challenging an award would have to deposit 100 per cent of the award amount with the Market Infrastructure Institution (MII).

The Securities and Exchange Board of India (Sebi) has invited public comments on the proposals till August 13.