NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management

Investor Grievances and Arbitration: formula sheet

Full chapter guide

Key formulas

Escalation ladder for a broker complaint: Broker → Stock exchange (investor service centre / grievance committee) → SEBI SCORES; Investor goes to the broker first. Unresolved matters go to the exchange where the broker is a member.
Escalation ladder for a DP complaint: Depository participant → Depository (NSDL / CDSL) → SEBI SCORES; The depository handles complaints against its own DPs.
Escalation ladder for an issuer complaint: Company (compliance officer / registrar) → Stock exchange where listed → SEBI SCORES; Exchanges follow up on complaints against listed companies.
What SCORES is: SCORES = SEBI Complaints Redress System (web-based, centralised); Investor lodges and tracks the complaint online. The entity uploads its action taken report.
Redressal versus arbitration: Redressal = complaint resolution; Arbitration = formal dispute resolution; Arbitration is a separate, later remedy at the exchange. Do not treat it as the first step.
Escalation ladder: Entity → SCORES → SMART ODR (conciliation → arbitration); Investor approaches the entity first, then files on SCORES, then moves to ODR if still unresolved.
SCORES 2.0 redressal time: Entity must resolve within 21 days of receiving the complaint; If unresolved or unsatisfactory, the complaint is reviewed by the designated body and then by SEBI.
SCORES 2.0 review levels: Entity → designated body review → SEBI review; Three levels. The first level is the entity itself, not SEBI.
Action Taken Report (ATR): ATR = entity's online reply on SCORES; The investor can view it and say whether it is satisfactory.
SMART ODR order of processes: Online conciliation first, then online arbitration; Arbitration is not the first step.
Escalation order: Broker → Exchange (ISC / online) → IGRC → Arbitration; Learn this as a sequence. Questions often ask what comes before or after a step.
ISC role: ISC = receive complaint + forward to member + follow up; The ISC facilitates. It does not give a binding decision.
IGRC outcome: IGRC = hearing + recommendation (grievance step); IGRC works on resolution of grievances. It is not a court and not arbitration.
Arbitration outcome: Arbitration = formal process + award; Arbitration is the formal stage after grievance resolution fails. Check the workbook for time limits and amounts.
Who the IPF protects: IPF → clients of a member declared a defaulter; Protects genuine investor claims, not the broker, not the clearing corporation.
Order of payment: Defaulter's assets first → then IPF (up to limit); The IPF tops up genuine claims. It is not the first source.
Compensation payable: Payable = lower of (admitted claim, per-investor limit); The limit applies per investor, per defaulting member. Verify the current limit figure in your latest NISM workbook, as limits have been revised.
Pro rata rule: If total admitted claims exceed available fund, payment is reduced proportionately; Applies only when the fund is insufficient. Check the wording in the workbook.
Fund distinction: IPF = compensation | ISF = investor education and services | SGF = settlement guarantee; Frequent trap in options.

Quick revision

The remedies follow a general guide: approach the entity first, then SCORES, then ODR if unresolved. Disputes with exchange members use a parallel exchange route of grievance handling, arbitration and appeal.
SCORES is SEBI's online system for lodging and tracking investor complaints.
Online dispute resolution (ODR) is an online route using conciliation and arbitration. You use it after you have complained to the entity and then on SCORES, and are still dissatisfied. The general sequence is entity, then SCORES, then ODR.
Exchanges run investor service centres and grievance committees to handle complaints against their members.
Arbitration at the exchange settles disputes between investors and members in a formal way. The award binds the parties, subject to the appeal provisions.
Conciliation and mediation are settlement-based and are not the same as arbitration.
A party dissatisfied with an arbitration award can use the appeal route, which has its own time limit and conditions.
Learn the exact time limits for filing arbitration and appeal from the current workbook, since options often differ by a single number.
The Investor Protection Fund pays compensation when a member is declared a defaulter or is expelled. It follows the exchange's claim and admission process, within prescribed limits.
Check who contributes to the fund and who manages it, as these are common one-line questions.
Each of the 100 questions carries 1 mark and a wrong answer costs 0.25. Answer when you can eliminate at least one or two options, and avoid blind guessing.

Common mistakes

Sending a complaint against a DP to the stock exchange. Fix: Link the pairs: broker with exchange, DP with depository, company with exchange where listed.
Thinking SEBI is the first place to complain. Fix: Remember that the investor approaches the entity first. SCORES is for unresolved complaints.
Thinking SCORES is where disputes are arbitrated. Fix: SCORES is for lodging and tracking complaints. Conciliation and arbitration happen on SMART ODR.
Putting arbitration before conciliation on the ODR platform. Fix: On SMART ODR, online conciliation comes first. Arbitration follows if conciliation fails.
Treating IGRC and arbitration as the same thing. Fix: Remember IGRC resolves grievances by recommendation. Arbitration is the formal stage that ends in an award.
Thinking the investor can skip the broker and go straight to the exchange. Fix: Learn the order: the member gets the first chance to resolve the complaint.
Thinking the IPF compensates market losses. Fix: The IPF covers only losses from a broker's default on genuine claims. Price falls are never covered.
Mixing up the IPF and the Settlement Guarantee Fund. Fix: The SGF supports the clearing corporation's settlement. The IPF compensates clients.

Exam tips

Most questions test the order of stages. Memorise the three ladders for broker, DP and company.
Watch for options that skip the entity-level stage. These are usually wrong.
Match each party with its supervising body: broker with exchange, DP with depository.
Wrong answers cost 25% of the marks assigned to the question in NISM-Series-VII. If you cannot rule out options, think before guessing.
If a question asks for a day count, rely on the latest workbook, not on old notes.
Memorise the three-rung ladder: entity, SCORES, SMART ODR. Many questions are just this sequence in disguise.
Tie 21 days to the entity's redressal under SCORES 2.0. If an option shows a different period for that step, treat it with suspicion.
Watch for options that put arbitration before conciliation or put SEBI as the first level of review. Both are traps.