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

An investor has a dispute with a trading member over a trade on the exchange and wants to resolve it through the exchange's arbitration mechanism. Which statement best describes the arbitration process under the exchange framework?

Under the exchange framework, disputes between an investor and a trading member are resolved by arbitrators appointed under the exchange's rules, who hear both parties and then pass an award. The member itself, a depository or the Registrar of Companies does not decide such disputes.

  1. AArbitration is conducted by arbitrators appointed under exchange rules, and the award is passed after hearing both partiesCorrect
  2. BArbitration is decided unilaterally by the trading member's compliance officer
  3. CArbitration is conducted only by the depository and not by the exchange
  4. DArbitration is decided by the Registrar of Companies

Explanation

Exchange arbitration uses arbitrators appointed from a panel under the exchange's rules and bye-laws, who hear both sides and give an award. The member's own officer cannot decide the dispute, and the depository or Registrar of Companies has no role in a trade dispute.

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