SEBI (Ombudsman) Regulations, 2003 – Securities Laws and Capital Markets Important Questions

Question 1.
What are the rights and responsibilities of the members of a company as per the SEBI’s Investors Education Guide? [June 2007 (4 Marks)]
Answer:
Rights of investor as a shareholder:

To receive the share certificates on allotment or transfer in due time.
To receive copies of the Annual Report.
To participate and vote in general meetings either personally or through proxy.
To receive dividends in due time once approved in general meetings.
To receive corporate benefits like rights, bonuses, etc.
To apply to CLB to call or direct the calling of an AGM.
To inspect the minute books of the general meetings and to receive copies.
To proceed against the company by way of civil or criminal proceedings.
To apply for the winding up of the company.
To receive the residual proceeds.

Group rights of investors as a shareholder:

To requisition an EGM.
To demand a poll on any resolution.
To apply to National Company Law Tribunal (NCLT) to investigate the affairs of the company.
To apply to NCLT for relief in cases of oppression and mismanagement.

Rights of debenture holder:

To receive interest on redemption of debentures in due time.
To receive a copy of the trust deed on request.
To apply for winding up of the company if the company fails to pay its debt.
To approach the Debenture Trustee with a grievance.

Responsibilities of an investor as a security holder:

To be specific
To remain informed
To be vigilant
To participate and vote in general meetings
To exercise your rights on your own or as a group.

Question 2.
What are the common grievances of investors in India? [June 2008 (4 Marks), June 2012 (5 Marks)]
Answer:
Common grievances of investors in India are as follows:

He has furnished inadequate information
The company has made misrepresentation in the prospectus, application form, or advertisements.
Delay or non-receipt of refund orders, allotment letters, or security certificates.
Delay or non-receipt of letter of offer in the right issue.
Delay or non-receipt of bonus or right shares.
Delay or non-receipt of notices of the general meeting.
Delay or non-receipt of annual reports.
Delay or non-receipt of dividend or interest.

Question 3.
What are SCORES? Discuss the salient features of SCORES? [Dec 2013 (5 Marks)]
Answer:
SCORES is a web-based centralized grievance redress system of SEBI (www.scores.gov.in). SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere. This enables the market intermediaries and listed companies to receive the complaints online from investors, redress such complaints, and report redressal online.

All the activities starting from the lodging of a complaint till its closure by SEBI would be online in an automated environment and the complainant can view the status of his complaint online. An investor, who is not familiar with SCORES or does not have access to SCORES, can lodge complaints in physical form at any of the offices of SEBI. Such complaints would be scanned and also uploaded in SCORES for processing.

Features of SCORES:

SCORES is web-enabled and provides online access 24 × 7.
Complaints and reminders thereon can be lodged online at the above website at any time from anywhere.
An email is generated instantaneously acknowledging the receipt of the complaint and allotting a unique complaint registration number to the complainant for future reference and tracking.
The complaint forwarded online to the entity concerned for its redressal.
The entity concerned uploads an Action Taken Report (ATR) on the complaint.
SEBI peruses the ATR and closes the complaint if it is satisfied that the complaint has been redressed adequately.
The concerned investor can view the status of the complaint online from the above website by logging in to the unique complaint registration number.
The entity concerned and the concerned investor can seek and provide clarification on his complaint online to each other.
Every complaint has an audit trail.
All the complaints are saved in a central database that generates relevant MIS reports enabling SEBI to take appropriate policy decisions and or remedial actions if any.

Question 4.
“SEBI expects the investors to make investments with their eyes and ears open.” Comment. [June 2014 (5 Marks)]
Answer:
Protection of the investor has been the main concern of SEBI. SEBI has issued various Guidelines, Circulars, Instructions relating to the issue of capital. Disclosure of full and fair details of all aspects of securities issued has been made the cornerstone of Capital Mobilization by Corporates. The various Guidelines emphasize the need to give full disclosure of facts in the issue documents, advertisements, prospectus, etc. SEBI has issued a number of Regulations on different intermediaries, which are binding on them.

However, SEBI expects the investors to make investments with their eyes and ears open and expects investors to go through the disclosures contained in the various documents issued by the company and make an informed decision before investing.

For this purpose, investors have to educate themselves on the fundamental aspects of choosing the securities, understanding the past record and future prospects of the company’s plans. SEBI has also issued Investor Education Guide, which contains briefly the Risk of Corporate Investments, Investors Rights and Responsibilities, basics of Trading in Securities, Transfer & Transmission of Securities, Depository & Dematerialization of Share Certificates, and Grievance redressal mechanism available.

Question 5.
As an aggrieved party, how do you lodge complaints in SCORES? [Dec 2014 (5 Marks)]
Answer:
To register a complaint online on the SCORES portal, (www.scores.gov.in) click on “Complaint Registration” under “Investor Corner”. The complaint registration form contains personal details and complaint details. There are certain mandatory fields in the Form. These fields include Name, Address for correspondence, State, Email Address of Investor. After filling in the personal details, select the complaint category, entity name, nature of complaint related to, complaint details in brief (up to 1,000 characters). A PDF document up to 1MB in size for each nature of complaint can also be attached along with the complaint as the supporting document.

On successful submission of the complaint, a system-generated unique registration number will be displayed on the screen which may be noted for future correspondence. An email acknowledging the complaint with the complaint registration number will also be sent to the complainant’s email id entered in the complaint registration form.

Question 6.
Write a short note on SCORES [June 2015 (4 Marks)]
Answer:
SCORES is a web-based centralized grievance redress system of SEBI (www.scores.gov.in). SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere. This enables the market intermediaries and listed companies to receive the complaints online from investors, redress such complaints, and report redressal online.

Features of SCORES:

SCORES is web-enabled and provides online access 24 × 7.
Complaints and reminders thereon can be lodged online at the above website at any time from anywhere.
An email is generated instantaneously acknowledging the receipt of the complaint and allotting a unique complaint registration number to the complainant for future reference and tracking.
The complaint forwarded online to the entity concerned for its redressal.
The entity concerned uploads an Action Taken Report (ATR) on the complaint.
SEBI peruses the ATR and closes the complaint if it is satisfied that the complaint has been redressed adequately.
The concerned investor can view the status of the complaint online from the above website by logging in to the unique complaint registration number.
The entity concerned and the concerned investor can seek and provide clarification on his complaint online to each other.
Every complaint has an audit trail.
All the complaints are saved in a central database that generates relevant MIS reports enabling SEBI to take appropriate policy decisions and or remedial actions if any.

Question 7.
SEBI Complaint Redress System (SCORES) is an efficient system of investor
grievance redressal mechanism of SEBI. Discuss the statement and salient features of SCORES. [June 2018 (6 Marks)]
Answer:
To register a complaint online on the SCORES portal, (www.scores.gov.in) click on “Complaint Registration” under “Investor Corner”. The complaint registration form contains personal details and complaint details. There are certain mandatory fields in the Form. These fields include Name, Address for correspondence, State, Email Address of Investor. After filling in the personal details, select the complaint category, entity name, nature of complaint related to, complaint details in brief (up to 1,000 characters). A PDF document up to 1MB in size for each nature of complaint can also be attached along with the complaint as the supporting document.

On successful submission of a complaint, a system-generated unique registration number will be displayed on the screen which may be noted for future correspondence. An email acknowledging the complaint with the complaint registration number will also be sent to the complainant’s email id entered in the complaint registration form.

Question 8.
What do you understand by the ‘Informal Guidance Scheme’ framed by the SEBI? Who can make a request for informal guidance under the Informal Guidance Scheme?
Answer:
In the interest of better regulation and orderly development of the securities market, SEBI in 2003 issued the Informal Guidance Scheme u/s 11(1) of the SEBI Act, 1992 by which informal guidance could be sought from SEBI by market participants either in the form of a no-action letter or interpretive letter with respect to any provision of any act, rule, regulation, guideline, circular, etc being administered by SEBI.

The Informal Guidance Scheme was of contemporary importance as SEBI receives a number of requests from various market participants for advance guidance. It was a formal scheme launched by SEBI in the name of providing informal guidance.

As the name suggests the guidance provided is ‘informal’ and is not to be construed as a conclusive decision of any question of law or fact by SEBI. Moreover, such a letter giving informal guidance cannot even be construed as an order of the SEBI.

A person eligible to benefit from Informal Guidance Scheme: The following persons may make a request for informal Guidance under the scheme:

Any intermediary registered with the SEBI.
Any listed company.
Any company which is in the process of listing its shares.
Any mutual fund trustee company or AMC.
Any acquirer or prospective acquirer under the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011.

Question 9.
Write short note on Confidentiality of request under the SEBI (Informal Guidance) Scheme, 2003 [Dec 2016 (3 Marks)]
Answer:
1. Any person submitting a letter or written communication under this scheme may request that it receive confidential treatment for a specified period of time not exceeding 90 days from the date of the Department’s response. The request shall include a statement of the basis for confidential treatment.

2. If the Department determines to grant the request, the letter or written communication will not be available to the public until the expiration of the specified period.

3. If it appears to the Department that the request for confidential treatment should be denied, the requestor will be so advised and such person may withdraw the letter or written communication within 30 days of receipt of the advice, in which case the fee, if any, paid by him would be refunded to him.

4. In the case where a request has been withdrawn under clause (c), no response will be given and the letter or written communication will remain in the SEBI files but will not be made available to the public.

5. If the letter or written communication is not withdrawn, it shall be available to the public together with any written staff response.

Question 10.
Explain what Is Informal Guidance under SEBI (Informal Guidance) Scheme, 2013, and who can seek guidance from SEBI? [June 2019 (5 Marks)]
Answer:
In the interest of better regulation and orderly development of the securities market, SEBI in 2003 issued the Informal Guidance Scheme u/s 11(1) of the SEBI Act, 1992 by which informal guidance could be sought from SEBI by market participants either in the form of a no-action letter or interpretive letter with respect to any provision of any act, rule, regulation, guideline, circular, etc being administered by SEBI.

A person eligible to benefit from Informal Guidance Scheme: The following persons may make a request for informal Guidance under the scheme:

Any intermediary registered with the SEBI.
Any listed company.
Any company which is in the process of listing its shares.
Any mutual fund trustee company or AMC.
Any acquirer or prospective acquirer under the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011.

Question 11.
State any eight grounds on the basis of which complaint can be made to Ombudsman under the SEBI (Ombudsman) Regulations, 2003.
Answer:
Grounds of Complaint [Regulation 13]: A person may lodge a complaint on any one or more of the following grounds either to the SEBI or to the Ombudsman concerned:

Non-receipt of refund orders, allotment letters in respect of a public issue of securities of companies or units of mutual funds or collective investment schemes.
Non-receipt of share certificates, unit certificates, debenture certificates, bonus shares;
Non-receipt of dividend by shareholders or unit-holders.
Non-receipt of interest on debentures, redemption amount of debentures, or interest on delayed payment of interest on debentures.
Non-receipt of interest on delayed refund of application monies.
Non-receipt of annual reports or statements pertaining to the portfolios.
Non-receipt of redemption amount from a mutual fund or returns from collective investment scheme.
Non-transfer of securities by an issuer company, mutual fund, Collective Investment Management Company, or depository within the stipulated time.
Non-receipt of letter of offer or consideration in takeover or buy-back offer or delisting.
Non-receipt of the statement of holding corporate benefits or any grievances in respect of corporate benefits, etc.
Any grievance in respect of public, rights, or bonus issue of a listed company.
Any of the matters covered u/s 24 of the Companies Act, 2013.
Any grievance in respect of the issue or dealing in securities against an intermediary or a listed company.

Question 12.
Referring to the provisions of the SEBI (Ombudsman) Regulations, 2003, answer the following:
(i) Who can make a complaint to Ombudsman?
(ii) Whether such a complaint can be made orally?
(iii) What are the conditions for making such a complaint?
(iv) Under which circumstances Ombudsman may dismiss or reject the complaint?
Answer:
The procedure of filing complaint:
Who can make a Complaint [Regulation 14(1)]: Any person who has a grievance against a listed company or an intermediary may himself or through his authorized representative or any investors association recognized by the SEBI, make a complaint against a listed company or an intermediary to the Ombudsman within whose jurisdiction the registered or corporate office of such listed company or intermediary is located.

If the SEBI has not notified any Ombudsman for a particular locality or territorial jurisdiction, the complainant may request the Ombudsman located at the Head Office of the SEBI for forwarding his complaint to the Ombudsman of competent jurisdiction.

How to make a complaint [Regulation 14(2)]: The complaint shall be in writing duly signed by the complainant or his authorized representative (not being a legal practitioner) in the Form specified in the Schedule to these regulations and supported by documents if any.

Conditions for making a complaint [Regulation 14(3)]: In order to make com- [ plaint to the SEBI or Ombudsman, the complainant has to comply with the following conditions.
1. It must be established before SEBI or Ombudsman that the complainant had made a written representation/complaint to the listed company or concerned intermediary and that:
(a) his complaint has been rejected by them or
(b) he had not received any reply within a period of 1 month or
(c) he is not satisfied with the reply given to him by the listed company or an intermediary.

2. A complaint is being made to SEBI or Ombudsman within 6 months from the date of the receipt of communication of rejection of his complaint by the listed company or concerned intermediary.

3. A complaint is not related to the subject matter which was settled through the Office of the SEBI or Ombudsman concerned in any previous proceedings. Thus the same complaint cannot be for a matter which was earlier settled by the SEBI or Ombudsman whether or not the complainant was party to such settled complaint.

4. A complaint is not related to any matter for which any proceedings before the SEBI or any Court, Tribunal or Arbitrator, or any other forum is already pending. Similarly, the complaint cannot be made for a matter for which the final order has already been passed by any competent authority, Court, Tribunal, Arbitrator, or any other forum.

5. The complaint is not in respect of or pertaining to a matter for which action g has been taken by the SEBI u/s 11(4) of the SEBI Act, 1992 or Chapter VI-A of the Act or u/s 12(3) of the Act or under any other regulations *1 made under the Act.

Rejection of complaint [Regulation 14(4)]: The Ombudsman may dismiss a complaint on any of the grounds specified in Regulation 14(3) or when such complaint is frivolous in his opinion.

Question 13.
Aggrieved by the Award of the Ombudsman directors of your company have decided to file a review petition before the SEBI. As a Company Secretary advise the board of directors of your company regarding provisions and procedure to be adopted for filing such review petition under the SEBI (Ombudsman) Regulations, 2003.
Answer:
Finality of award and circumstances of review [Regulation 20]:
To whom the Award is binding: An Award given by the Ombudsman shall be final and binding on the parties and persons claiming under them respectively.

Who can file a review petition: Any party aggrieved by the award on adjudication may within 1 month from the receipt of the award file a petition before the SEBI setting out the grounds for review of the award.

Condition for review: An award may be reviewed by the SEBI only if:
(a) there is substantial injustice, or
(b) there is an error apparent on the face of the award.
Where a petition for review is filed by a party from whom the amount mentioned in the award is to be paid to the other party in terms of the Award, such petition shall not be entertained by the SEBI unless the party filing the petition has deposited with the SEBI 75% of the amount mentioned in the award. However, SEBI may, for reasons to be recorded in writing, waive or reduce the amount to be deposited.

Order by SEBI: SEBI may review the award and pass such order as it may deem appropriate.
The time limit for disposal of review petition: SEBI shall endeavor to dispose of the matter within a period of 45 days of the filing of the petition for review. The award passed by the Ombudsman shall remain suspended till the expiry of the period of 1 month for filing a review petition or till the review petition is disposed of by the SEBI.

Implementation of Award: The party so directed shall implement the award within 30 days of receipt of the order of the SEBI on review or within such period as may be specified by the SEBI in the order disposing of the review petition.

Procedure to be adopted by the SEBI in review petition: SEBI may determine its own procedure consistent with principles of natural justice in the matter of disposing of review petition and may dismiss the petition if it does not satisfy any of the specified grounds.

Question 14.
Write a short note on Ombudsman [June 2012 (4 Marks)]
Answer:
1. SEBI introduced the concept of Ombudsman for redressal of grievances of investors in securities against the listed companies and the intermediaries in the securities market relating to refund of money or securities amount or any claim in respect of dealing in securities or deficiency in services by intermediary and other related matters.

2. It envisages a system of Ombudsman which should, as far as possible, be speedy, cheaper, efficacious, simple easily accessible, informal, and amenable to the investors generally spread over the country.

3. Ombudsman for securities market may be established with the statutory status since SEBI has powers under the SEBI Act, 1992 to protect the interests of the investors and the matters connected with the securities market by such measures as it may think fit.

The ombudsman shall have the following powers and functions:
(a) To receive specified complaints against any intermediary or a listed company or both.
(b) To consider such complaints and facilitate resolution thereof by amicable settlement.
(c) To approve a friendly or amicable settlement of the dispute between the parties.
(d) To adjudicate such complaints in the event of failure of settlement thereof by friendly or amicable settlement.

Question 15.
Prateek applied in the IPO of Maxgrow Ltd. for 100 Equity Shares. He was not eligible to get any shares according to the allotment schedule and also has not received the refund amount within the time stipulated under the Companies Act, 2013. Prateek approached the Company through written representation on January 10, 2018. The company neither replied nor processed the refund claim. In the light of the SEBI Regulations, answer the following:
(i) How much time should elapse before approaching Ombudsman from the date of written representation?
(ii) State the grounds and the procedure for filing a complaint before Ombudsman.
(iii) Whether Prateek can hire the services of a legal practitioner to plead his case before Ombudsman? [Dec 2018 (8 Marks)]
Answer:
As per Regulation 14(3) of the SEBI (Ombudsman) Regulations, 2003, in order to make a complaint to the SEBI or Ombudsman, the complainant has to comply with the following conditions.
1. It must be established before SEBI or Ombudsman that the complainant had made a written representation/complaint to the listed company or concerned intermediary and that:
(a) his complaint has been rejected by them or
(b) he had not received any reply within a period of 1 month or
(c) he is not satisfied with the reply given to him by the listed company or an intermediary.

2. A complaint is being made to SEBI or Ombudsman within 6 months from the date of the receipt of communication of rejection of his complaint by the listed company or concerned intermediary.

Thus, Prateek can make a complaint to Ombudsman if does receive a reply from Maxgrow Ltd. within a period of 1 month ie. he can make a complaint after 11 Feb 2018.

Grounds and procedure for making a complaint to Ombudsman:

A complaint is being made to SEBI or Ombudsman within 6 months from the date of the receipt of communication of rejection of his complaint by the listed company or concerned intermediary.
A complaint is not related to the subject matter which was settled through the Office of the SEBI or Ombudsman concerned in any previous proceedings. Thus the same complaint cannot be for a matter which was earlier settled by the SEBI or Ombudsman whether or not the complainant was party to such settled complaint.
A complaint is not related to any matter for which any proceedings before the SEBI or any Court, Tribunal or Arbitrator or any other forum is already pending. Similarly, the complaint cannot be made for a matter for which the final order has already been passed by any competent authority, Court, Tribunal, Arbitrator, or any other forum.
The complaint is not in respect of or pertaining to a matter for which action has been taken by the SEBI u/s 11(4) of the SEBI Act, 1992 or Chapter VI-A of the Act or u/s 12(3) of the Act or under any other regulations made under the Act.

As per Regulation 19(3) of the SEBI (Ombudsman) Regulations, 2003, no legal practitioner shall be permitted to represent the defendants or respondents at the proceedings before the Ombudsman except where a legal practitioner has been permitted to represent the complainants by the Ombudsman.

Thus, Prateek can hire the service of a legal practitioner after taking prior approval of the Ombudsman.

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