SEBI Introduces Revolutionary Online Dispute Resolution Mechanism For Securities Market Disputes[1]

The Securities and Exchange Board of India (SEBI) has introduced a new era of dispute resolution through the issuance of the SEBI ODR Circular on July 31, 2023. This circular, driven by the imperatives of enhanced accessibility, affordability, and accountability, establishes Online Dispute Resolution (ODR) as the primary method for addressing disputes arising from transactions within the Indian securities market.

This transformative initiative stems from the enactment of the Securities and Exchange Board of India (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023, which were promulgated on July 3, 2023. These regulations, accompanied by the SEBI ODR Circular, amend dispute resolution clauses across a wide spectrum of securities market regulations, paving the way for a comprehensive and innovative approach to resolving disputes.

SEBI’s adoption of ODR represents a global first in several significant aspects. It introduces the concept of statutory conciliation and arbitration involving private ODR entities, signifying a notable departure from established practices. Crucially, ODR now encompasses a broad range of disputes, encompassing various degrees of complexity, thus challenging the perception that it is suited solely for simpler matters. This shift underscores the genuine potential of ODR within diverse dispute contexts.

The circular also constitutes a noteworthy milestone wherein regulatory bodies delegate the authority of appointing neutral parties to private ADR/ODR entities. This delegation, coupled with appropriate checks and balances, addresses the prevalent concern of delays in dispute resolution, a prevailing issue within India’s legal landscape.

Furthermore, SEBI’s establishment of quality standards for ODR service providers introduces a novel dimension. This positions ADR/ODR institutions as accountable service providers, rectifying a hitherto absent element. Another pioneering facet is the inclusion of multiple ODR institutions, fostering healthy competition, continuous accountability, and adaptability.

Prominent features delineated in the SEBI ODR Circular encompass a comprehensive framework for escalating cases, the selection of ODR institutions, the conduct of online conciliation and arbitration, stipulated timelines for each process, and associated costs. The circular endows ODR institutions with the authority to expeditiously resolve disputes arising from securities market transactions, employing online audio-video technologies. The criteria for empanelling ODR institutions incorporate stringent quality control mechanisms.

Each Market Infrastructure Institution (MII) is entrusted with the responsibility of enlisting one or more ODR institutions and establishing a unified Online Dispute Resolution Portal (ODR Portal). Market participants are obligated to register on the ODR Portal within designated timeframes and communicate its availability to investors/clients for the purpose of dispute resolution.

In summary, SEBI’s embrace of ODR marks a paradigmatic shift in securities market dispute resolution, promising efficiency, accessibility, and equity. This landmark stride possesses the potential to not only reshape the dispute resolution landscape in India but also exert a transformative influence on global practices.

[1] https://www.sebi.gov.in/legal/circulars/jul-2023/online-resolution-of-disputes-in-the-indian-securities-market_74794.html