The NSE is the National Stock Exchange, which, apart from facilitating the listing and trading of shares of companies also tries to protect investors’ interests. This is welcome because generally, the bargaining power of individual investors may not match up to the might of listed companies and therefore, where an investor has a grievance against a broker or a listed company, it may not always be easy to get proper relief. To help investors resolve such complaints, the NSE has its own complaint and grievance redress mechanism, in the form of the “Investor Services Cell” (the Cell). The Investor Services Cell also provides assistance in arbitration proceedings under the Exchange’s Arbitration Framework.
Every individual who holds shares in a company is referred to as an ‘investor’, and persons permitted to trade in securities listed on the NSE are referred to as ‘Trading Members’. These trading members (such as stock brokers, banks, securities firms, etc.) are approved by the NSE to trade shares on the NSE screen system.
The purpose of the Investor Services Cell of the Exchange is to deal with complaints of investors against:
- Trading Members of the Exchange; or
- Companies listed on the NSE.
Complaints may range from minor glitches in online trading, to non issue of important documents by listed companies. Some typical complaints have been described below:
Complaints against Trading Members
The Cell accepts a wide range of complaints against Trading Members such as:
- Non-issue of documents to the investor by the Trading Member (such as Know Your Client Form (KYC), Member Constituent Agreement (MCA), Risk Disclosure Document (RDD), Statement of Accounts for Funds or Securities, Margin Statements, Contract notes etc).
- Non-receipt of funds, securities or margin by the investor after instructing a Trading Member to trade in the same (for example, if you instruct a broker to sell your shares in a particular company, and he does so but does not transfer the sale proceeds to you);
- Non-return of security deposit by the trading member (this could be a security deposit by cheque or in the form of securities);
- Non-receipt of amounts such as dividends on shares or interest on debentures by investors (for example, where you are entitled to a corporate benefit such as issue of shares in a Bonus issue, Stock Split, Merger, De-merger, Dividend Issue, etc, and the Trading Member does not transfer such benefits to you);
- Execution of trades without the consent of the investor;
- Charging of excess brokerage by a trading member or sub-broker, i.e. charging brokerage in excess of permissible limit of 2.5%, or charging a different brokerage than was mutually agreed in writing;
- Non-receipt of credit balance as per the statement of account.
- Claiming losses due to a fault of the broker: Stock brokers can be held accountable for “opportunity losses” due to technical glitches while trading through online platforms.
An important ruling on this point was delivered by the Delhi High Court in a case filed by a retail investor against Reliance Securities. The investor complained that despite his instructions to sell some of his shares, the trader did not carry out the transaction on time due to technical faults, and the investor made a loss on the sale as the transaction was delayed. The Delhi High Court upheld the lower court’s judgement and held that where an investor places an order for sale or purchase of securities with a trader, and due to some fault of the online trading system, the transaction does not go through, then the trader must compensate for the investor’s loss (here, a delayed sale executed by the trader resulted in losses for the investor). It also held that such losses cannot be considered to be “notional”, i.e., not actually existing since the potential gain (which would have gone into the investor’s pocket if the sale had been conducted on time) did not actually happen. In addition, the court held that the investor cannot be held responsible for other causes of glitches such as the trader being unable to contact the investor’s bank to arrange for a transfer of funds, etc. This ruling has made it necessary for brokers to ensure that investors trading online with them need to be given a smooth, glitch-free procedure and the traders themselves are responsible for getting the right technology to ensure this. If this is not so, the investor may claim his/her losses back from the broker.
Complaints against Listed Companies
An investor may make complaints against Listed Companies to the Investor Services Cell. Some Typical complaints are as follows:
- In a public offering of shares(such as initial public offerings (IPOs) follow-on public offerings, Rights Offers or Preference offers), a complaint may be filed if the investor does not receive:
- allotment advice;
- the securities purchased in the public offer;
- refund amounts for securities paid for but not allotted;
- interest on delay in redemption amounts or refund amounts due to the investor;
- Composite Application Form for a Rights Offer;
- a letter of offer in a buyback of shares by the company; and
- sale proceeds in case of a bonus issue, stock split, etc.
- In corporate actions (such as declaration of dividend, mergers, bonus issue, etc) an investor may lodge a complaint where he has not received his dues, such as:
- declared dividend;
- interest on Debentures, Bonds or other Debt Instruments;
- redemption amounts in relation to instruments such as shares, debentures, bonds or units;
- securities (i.e., shares, debentures, bonds or units) on account of a Bonus Issue, De-merger, Merger or Stock Split.
- In case of transfer of securities, investors may file complaints:
- where securities are not received after dematerialization (i.e., the process whereby securities are converted into dematerialized digital form) or transfer; or
- where duplicate certificates of securities are not received;
- Complaints may also be filed for other matters, such as where copies of the company’s Annual Reports are not sent to the investor.
- Regional Investor Complaint Resolution Committees: Where complaints remain unsolved despite the intervention on part of the Exchange, the investors may approach Regional Committees, which are situated at Mumbai, Delhi, Kolkata and Chennai.
Which complaints are not taken up by the Cell?
The following types of complaints against Trading Members will not be taken up by the Cell:
- Complaints relating to trades not executed on the Exchange;
- Claims of a broker for private commercial dealings with the trading member;
- Claims relating to loans or other financing arrangements (which are not within the framework of the stock exchange);
- Complaints in relation to transactions which are already the subject matter of Arbitration proceedings;
- Complaints involving payment of funds and transfer of securities to entities other than a Trading Member; and
- Claims for mental agony/harassment and expenses incurred for pursuing the matter with the Cell.
The following types of complaints against Companies will not be taken up by the Cell:
- Complaints relating to securities not listed on the Exchange;
- Complaints for refund of postal charges, telephone expenses and miscellaneous charges;
- Compensation for mental agony, harassment, etc;
- Notional loss due to delay in receipt of shares sent for transfer or after IPO;
- Complaints not related to the Exchange;
- Complaints relating to pledge and assignment of shares; and
- Complaints where the complainant is unable to establish ownership of the shares or other security.
How do I lodge a complaint with the Cell?
Investors may lodge complaints with the Cell in the format prescribed by the Exchange (explained further below) along with the supporting documents either:
- in electronic mode through the website (www.nseindia.com), or
- by sending in their complaints to their nearest investor service centre (for a list of the centres go to http://www.nse-india.com/content/assist/asst_isc_contact_main.htm).
There are two forms to file complaints with the Cell:
- the Investor Complaint Form-TM is used to lodge complaints against trading members or registered sub-brokers; and
- the Investor Complaint Form – CO is used for complaints in relation to companies traded on the National Stock Exchange.
These forms are accessible on the NSE website www.nseindia.com, under the link “Investors”.
The form contains details of the investor, the trading member, and the complaint. Depending upon the nature of the complaint, it may be necessary for the complainant to provide copies of some relevant documents. For instance, in case of complaints in relation to companies, the following documents may be relevant:
- statement of holding;
- counter part of application form/ composite application form for issue of shares;
- copies of bank statement / passbook;
- acknowledgement by syndicate member or bank;
- copies of allotment advice, share / debenture / bond certificate, letter of entitlement, etc;
- copies of relevant acknowledgements;
- copies of relevant letters issued by company, any transfer deed, etc;
- copies of acknowledgement (s) given by company, indemnity bond, any FIR filed with police, etc.
What happens when a complaint is lodged with the Cell?
Complaints against Trading Members
In cases of complaints against Trading Members and sub-brokers, once the complaints (and the relevant documents) are received by the Cell from the investor, they are forwarded to the Trading Member or sub-broker, asking them to provide their comments or to resolve the case. The Trading Members are expected to file their reply within 21 days. If the Trading Member or the registered sub-broker disputes the claim of the investor, the response of the Trading Member is forwarded to the investor. If required, both the parties are called for a joint meeting to resolve the dispute.
In cases where the disputes remain unresolved, the parties may refer the matter to Arbitration.
Complaints against Companies, Share Transfer Agents (STAs) & Registrars.
Complaints received from investors are forwarded to the respective Companies/STAs for necessary action at their end. If no response is received from the company/STAs within 21 days, a follow-up by way of letters, telephone calls and personal meetings is undertaken to expedite their replies.
All in all, the Cell will do its best to try to get the company or broker to resolve your complaint. The advantages of going through the Cell rather than filing a complaint with the company or broker yourself is that they are more likely to respond to the Cell which is affiliated to the NSE.
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