SEBI to drop ombudsman regulations, eyes failsafe methods

Despite several attempts, market regulator Securities and Exchange Board of India or SEBI has failed to successfully implement the ombudsman method for grievance redressal. So now, it's time for Plan B. Tanvi Shukla and Priyanka Ghosh report.

Speedy redressal of investor grievances -- that was the driving force behind SEBI's August 2003 ombudsman regulations. But this has not taken off due to legal hitches. Sources say SEBI now plans to drop the regulations.

Here's what the original plan was: The ombudsman, selected by a SEBI selection committee and the SEBI chairman, was empowered to facilitate amicable resolution of a complaint against any listed company or market intermediary, and if the dispute remained unsettled, could step in to adjudicate.

But the powers given to the ombudsman are those given to a quasi judicial body and SEBI is not empowered to appoint a quasi-judicial body. Similarly, the ombudsman here was empowered to look into complaints of failure to redeem debentures or non payment of interest on them.

These issues fall under the companies act and not really SEBI's jurisdiction. So seven years after inception, sources say this ombudsman method is to be dropped altogether. While it has already begun tightening the arbitration process to widen the scope and ease of processing grievances, it is also working with market institutions and intermediaries for a more failsafe method.