SEBI plans to move the administration of investor disputes from private institutions to stock exchanges and depositories. This change aims to speed up the resolution of complaints by integrating the process with existing market infrastructure. Investors will also gain more influence in selecting arbitrators, and new rules will require companies to deposit funds when challenging arbitration awards.
Detailed Coverage
The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a major redesign of the current Online Dispute Resolution (ODR) framework. The regulator intends to transition the administrative control of investor grievances from dedicated, independent ODR institutions to Market Infrastructure Institutions (MIIs), which include major stock exchanges like the BSE and NSE, as well as depositories and clearing corporations.
Streamlining Through Market Infrastructure
By placing the responsibility of managing online conciliation and arbitration directly with MIIs, the regulator aims to leverage the existing regulatory oversight these entities already exercise over brokers, listed companies, and other market participants. SEBI has noted that this integration is expected to create a more cohesive and efficient system for handling investor complaints. The regulator is currently inviting public comments on these proposals, with the submission deadline set for August 13, 2026.
Empowering Investors in Arbitration
One of the significant shifts in the proposed framework addresses how arbitrators are chosen. Currently, investors have often expressed concerns about the lack of transparency or choice in the appointment of arbitrators. Under the new proposal, the system would allow both the investor and the regulated entity to nominate preferred arbitrators from a verified panel. MIIs will facilitate the process by attempting to match preferences, while a centralized, objective process will be used if a mutual agreement cannot be reached. This is intended to increase trust in the fairness of the resolution process.
Faster Timelines and Financial Safeguards
To reduce waiting times, SEBI plans to link the ODR framework directly with the SEBI Complaints Redress System (SCORES). This integration is expected to automatically escalate unresolved complaints to the conciliation stage, which could cut down the total time taken to resolve a grievance by approximately 21 days. Furthermore, the proposal includes a new protective measure for investors. If a regulated entity chooses to challenge an arbitration award that favors an investor, it will be required to deposit the full award amount with the MII. This ensures that the financial interests of the investor are protected during legal appeals. As an immediate benefit, the MII would have the authority to release up to 50 percent of the award amount, or Rs 5 lakh—whichever is lower—to the investor as interim relief.
Investors and market participants should track the upcoming final circular from SEBI after the public consultation period ends, as this will clarify the implementation timeline and any adjustments made based on industry feedback.