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Investor Protection Measures

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In the modern world, stock markets have evolved as important drivers of national economy. Fair and clear-cut rules and regulations are enforced by governing bodies to ensure safety of all participants connected to the market. All stock exchanges have their own rules and regulations. Governing bodies take special care to protect interests of investors as this class is most widely dispersed, and generally more vulnerable to being taken for a ride. Additionally it is the investor class that infuses the capital into the market and hence bears higher risks than other participants.

Various steps initiated by the NSE for Investor protection are as follows :

Settlement Guarantee Fund
In order to guarantee settlement, it has set up a Settlement Guarantee Fund contributed by the clearing members of the Corporation. As counter-party to settlement obligations, NSE guarantees financial settlement. As a result, though there have been a few defaults by member firms, the Clearing Corporation has stepped in to complete settlement and avoided market disruption.
Short deliveries and un-rectified bad deliveries are automatically auctioned by NSCCL so that settlement is completed within a well-defined time frame.

Investor Grievances Cell
The Investor Grievances Cell (IGC) attends to various problems faced by investors in dealing with the two integral parts of the Capital Markets, Trading Members and Companies whose securities are traded on the Exchange. The investors can report their complaints/ grievances to the IGC through e-mails or through Complaint forms. All valid complaints are assigned a unique complaint no. and are entered into a database for easy follow up and necessary action. Most complaints are resolved within a period of 45 days. On exhausting all means, if the matter remains unresolved, it is referred to Arbitration.

Arbitration

Arbitration is an alternative dispute resolution mechanism provided by the NSE for resolving disputes between the trading members and between trading members & constituents (i.e. clients of trading members), in respect of trades done on the Exchange. This process of resolving a dispute is comparatively faster than other means of redressal.

The facility of arbitration on the Exchange can be availed by:
Investors who have dealt on the Exchange through its trading members and who possess a valid contract note issued by the trading member of the Exchange.
Investors who have dealt on the Exchange through registered sub-brokers of the trading members of NSE and who possess valid sale/purchase note issued by the registered sub-broker.

The Exchange provides a list of eligible persons approved by SEBI for each of the Regional Arbitration centers. The persons who form part of the list of Arbitrators are persons who possess an expertise in their respective fields including banking, finance, legal (judges) and capital market areas (brokers).
The appointment of an Arbitrator is linked to the claim amount. If the claim amount is Rs 2.5 millions or less, then a Sole Arbitrator is appointed and if the claim amount is more than Rs 2.5 millions, then a panel of three arbitrators is appointed.

The comprehensive approach to risk management taken by BSE and NSE encompassing the quality of clearing/trading members, tight monitoring mechanism, strict margin system, efficient settlement systems have made the Secondary market in India comparable to any of the markets worldwide.

Useful Links: SEBI
NSE Investor Center

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