Ombudsman for Securities Market
An Ombudsman for the Securities Market is a proposed independent redressal authority that would provide retail investors with a low-cost, accessible forum to resolve complaints against SEBI-regulated intermediaries, drawing on the ombudsman model successfully deployed in banking and insurance sectors.
The concept of an Ombudsman for the Securities Market has been discussed in Indian regulatory and investor protection circles as a logical extension of the ombudsman model that has functioned well in banking (RBI Ombudsman) and insurance (Insurance Ombudsman). The vision is to create an accessible, quasi-judicial authority to which retail investors can escalate unresolved complaints against stockbrokers, depository participants, portfolio managers, investment advisers and listed companies after the first-level resolution mechanisms have failed to provide satisfaction.
The Banking Ombudsman established by the RBI has demonstrated the viability of the model. A customer who is dissatisfied with a bank's response to a complaint can approach the Banking Ombudsman at no cost. The Ombudsman can summon records, conduct inquiries and pass awards up to a defined limit. The process is faster, cheaper and more accessible to a lay person than civil litigation or formal arbitration. The Insurance Ombudsman operates on similar principles for insurance disputes.
For the securities market, a dedicated Ombudsman would address several gaps in the current framework. SCORES handles complaints but does not itself adjudicate disputes — it facilitates communication between the complainant and the entity complained against. Exchange arbitration applies primarily to broker-related trade disputes and requires some familiarity with legal processes. The Securities Appellate Tribunal handles appeals against SEBI orders, not investor-intermediary disputes. An Ombudsman could fill the space between SCORES and formal arbitration, providing an efficient tribunal for moderate-value complaints.
Key design questions for a Securities Market Ombudsman include the monetary jurisdiction (the maximum award that can be granted), the scope of intermediaries covered, the appeal process against Ombudsman awards, funding (typically from a levy on regulated entities), independence from both SEBI and industry, and staffing with individuals possessing securities market expertise.
SEBI has moved in this direction through the expansion of ODR and the integration of conciliation in SCORES. Whether these mechanisms evolve into a formally designated Ombudsman office or remain as enhanced versions of existing infrastructure will depend on further policy deliberation. Investors should track SEBI consultation papers and annual reports for signals on this framework's development.