What’s Sebi’s score: Increasing complaints test regulator’s redressal system

Mumbai: The rising interest in India’s equity markets has brought with it an attendant problem the regulator is grappling with—a pile-up of investor complaints related to issues such as unauthorised trading, delayed payments, discrepancies in account statements, and mis-selling.

The Securities and Exchange Board of India (Sebi) has resolved about 145,000 complaints since October 2021 when the data is available, but the number of unresolved complaints has been creeping up, indicating potential structural flaws in the system.

Launched in 2011, the Sebi Complaints Redressal System (Scores) is a web-based, centralized platform to receive investor complaints on issues with listed companies, market intermediaries, and recognized market institutions. But experts say Scores faces challenges in terms of efficiency and timely resolution of complaints.

Sebi did not respond to Mint’s queries.

“The stock market has become so active, with many companies listed on various exchanges and numerous filings, that tracking compliance and penalties has become increasingly difficult,” said Ketan Mukhija, senior partner at Burgeon Law.

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Although an online complaint redressal system is helpful, a lack of clarity on how soon pending complaints will be addressed leaves investors unclear about their recovery options, he said.

Among the common complaints on Score, according to Mukhija, are issues with registered brokers or advisers, especially those peddling advice through informal channels such as WhatsApp groups—an issue Sebi has repeatedly flagged. “When things go wrong, investors often turn to Scores to lodge their grievances,” he said.

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A system upgrade

Mint’s analysis of monthly data from Scores shows that, on an aggregate basis, for every 100 cases Sebi resolved between October 2021 and December 2024, investors filed 94 new complaints. In April last year, this was much higher: for every 100 cases Sebi resolved, investors filed about 155 new complaints. The new cases add to complaints pending from the previous month.

Scores data analyzed by Mint show that between October 2021 and December 2024, Sebi received about 137,000 investor complaints. During the same period it resolved about 145,000 complaints.

Sebi has been resolving an equal number of complaints as it receives on Score, but also has to deal with a backlog of cases.

On aggregate, Sebi receives about 3,400 cases a month. This is in addition to its already existing or pending cases, which is 3,400 on average every month. Sebi’s disposal rate for investor complaints on aggregate is about 3,600 a month. But this leaves it with the backlog of the existing cases as well as new complaints flowing in.

While the data is available only from October 2021, grievances were filed earlier too, which could have led to the backlog. Also, cases filed in a particular month can be resolved after several months. 

Since the data on pending cases is the outstanding unresolved cases as of that month, while that for new cases are only for that particular month, despite Sebi resolving more investor complaints it could still be left with some pending cases.

Mukhija said delays in resolving investor complaints are a major concern, much like the issues faced in faceless tax assessments, where cases can take years to resolve.

Under the faceless assessment scheme (FAS), tax cases are randomly allotted to officers, a contrast from earlier when cases were allotted based on the area of a taxpayers’ residence. Mint reported citing tax lawyers in August last year that the system had made communication harder, with more cases landing up in court.

In April last year, Sebi launched an upgraded version of its complaints redressal platform, called Scores 2.0. Under the new system, complaints are automatically forwarded to the relevant entities, which have 21 days to submit a report.

If an investor is dissatisfied with the report, they can request a first-level review, followed by a second-level review, if necessary. If no further review is requested, the complaint is marked as resolved.

But complaints on Scores continue to pile up, particularly those in which investors are given time to escalate issues.

Pending complaints often include cases that remain open to allow for first or second-level reviews.

Sebi didn’t immediately reply to queries emailed on Friday.

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Structural improvements

According to Anupriya Saxena, partner at law firm JMJA & Associates Llp, while Scores 2.0 is capable of processing complaints efficiently the persistent backlog reveals structural issues that need attention.

“While the system is well-designed, there are still delays, particularly with cases that involve unique technicalities,” she said.

Saxena recommended that Sebi introduce clearer timelines and metrics for monitoring progress, as well as leverage artificial intelligence and data analytics to prioritise complaints based on their severity.

“A more targeted public awareness campaign would help investors better understand how to file complaints correctly, thereby reducing errors and improving the overall system’s effectiveness,” she suggested.

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Both Saxena and Mukhija of Burgeon Law agreed that Sebi could strengthen its oversight mechanisms to prevent common issues such as unauthorized trading, delayed payments, and mis-selling of financial products.

Saxena also proposed that Sebi invest in continuous professional training for brokers and advisers, as well as implement regular audits to enhance transparency.

She also suggested enhancing the Scores infrastructure by integrating it with other regulatory platforms and investing in scalable cloud infrastructure.

While Scores plays a crucial role in addressing grievances, Sebi’s focus should shift towards preventing those issues from arising in the first place, she said.