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

A client disputes a trade with a stockbroker and the dispute is referred to arbitration at the stock exchange. Which statement about the exchange arbitration mechanism is correct?

Arbitration at the exchange is handled by arbitrators from the exchange's panel, who hear both the client and the broker before passing an award. The client can also initiate it, and the award can be appealed, so the other statements are incorrect.

  1. AArbitration is conducted by arbitrators from the exchange's panel and the award is passed after hearing both partiesCorrect
  2. BThe exchange's board decides the matter without hearing the client
  3. CArbitration can only be initiated by the broker, not by the client
  4. DThe award of the arbitrators cannot be challenged in any forum

Explanation

Exchange arbitration is carried out by arbitrators drawn from the exchange's panel who hear both sides before giving an award. Either party, including the client, can invoke it. Awards are not beyond challenge, as appeal routes exist, so that option is wrong.

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