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

A client of a stock broker has a dispute with the broker regarding a trade on the exchange. Before the matter proceeds to arbitration, which step does the exchange framework provide to encourage amicable resolution with the help of a neutral person?

Mediation is the step provided before or alongside arbitration, where a neutral mediator helps the client and the broker reach a mutually acceptable settlement. The other options concern investor compensation on default, delisting or penalties, which are not amicable resolution mechanisms.

  1. AInvestor Protection Fund payout
  2. BMediationCorrect
  3. CDelisting of the security
  4. DAutomatic penalty on the broker

Explanation

The exchange dispute resolution mechanism provides for mediation, in which a neutral mediator helps the parties reach a settlement. The Investor Protection Fund compensates investors only when a broker defaults, delisting concerns securities, and an automatic penalty is not a dispute-resolution step.

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