SEBI’s new Online Dispute Resolution (ODR) System

August 7, 2023
Posted by: OptimizeIAS Team
Category: DPN Topics

SEBI’s new Online Dispute Resolution (ODR) System

Subject: Economy

Section: Capital Market

In News: SEBI is set to operationalise a new online dispute resolution (ODR) system involving institutions, conciliators and arbitrators for the capital market.

Key Points:

An investor or client should first take up the grievance with the market participant by lodging a complaint directly with the concerned market participant.
If the grievance is not redressed satisfactorily, the investor or client may escalate the same through the SCORES (Sebi Complaints Redress System) Portal.
The aim of the measure is to streamline the existing dispute resolution mechanism in the securities market under the aegis of stock exchanges and depositories Market Infrastructure Institutions (MII) by establishing a common ODR portal.
The new system will harness online conciliation and online arbitration for resolution of disputes arising in the securities market.
What are ODR institutions?
- According to Sebi, each MII will identify and empanel one or more independent ODR institutions. These institutions will have qualified conciliators and arbitrators. MIIs will, in consultation with their empanelled ODR institutions, establish and operate a common ODR portal.
- All listed companies, specified intermediaries and regulated entities in the securities market (referred to as market participants) will enrol on the ODR portal.
- Sebi has not specified who will qualify as ODR institutions. But it is likely to outsource the investor dispute resolution process with the involvement of private ODR institutions.
The steps for dispute resolution:
- An investor or client should first take up the grievance with the market participant by lodging a complaint directly with the concerned market participant.
- If the grievance is not redressed satisfactorily, the investor or client may escalate the same through the SCORES Portal.
- After exhausting all available options, if the investor or the client is still not satisfied, he or she can initiate dispute resolution through the ODR Portal.
- The first step is conciliation. If this fails, the next step is arbitration.

Conciliation and Arbitration

Conciliation and arbitration are two distinct methods of alternative dispute resolution (ADR) used to resolve conflicts outside of traditional court proceedings.
Conciliation:
- Conciliation is a process where a neutral third party, called a conciliator, facilitates communication and negotiation between the parties in dispute.
- The conciliator acts as a mediator, helping the parties identify their issues, explore possible solutions, and reach a mutually acceptable agreement.
- The conciliator’s proposed settlement is non-binding, meaning the parties are not obligated to accept the agreement. They can choose to accept or reject the conciliator’s proposal.
- Conciliation is generally a less formal process than arbitration or litigation, allowing for a more flexible and collaborative approach to dispute resolution.
- Participation in conciliation is typically voluntary, and both parties must agree to engage in the process.
Arbitration:
- Arbitration is a process where a neutral third party, called an arbitrator or a panel of arbitrators, hears the arguments and evidence from both parties and makes a binding decision called an award.
- The arbitrator acts as a judge and renders a decision based on the evidence presented during the arbitration proceedings.
- The arbitrator’s decision, known as the award, is legally binding on the parties and enforceable in courts.
- Arbitration often follows formal procedures, similar to court proceedings, including the presentation of evidence and witness testimonies.
- Parties can agree in advance on the rules and procedures that govern the arbitration process, providing flexibility and allowing them to choose a law that best suits their needs.