Conciliation

Conciliation is an attempt to settle a dispute by agreement before anyone has to decide who is right. A neutral conciliator talks to both sides - the investor and the broker, depository participant or other market participant - and helps them reach a solution they both accept.

In the securities market's online dispute resolution system, conciliation comes before arbitration. If it works, the dispute ends with a signed settlement agreement. If it does not, the conciliator does one more important thing: he works out the admissible claim value - the amount he considers payable to the investor. That figure then drives the deposit a broker must make if the matter goes to arbitration.

Investors do not pay for it: the conciliation fee is ultimately borne by the market participant.

From Chapter 7 (sections 7.3.4 to 7.3.7 and the ODR flow):

Before conciliation. When a complaint reaches the SMART ODR portal, the relevant MII reviews it and tries to resolve it within 21 days. Only if that fails is it referred to an ODR Institution, allocated on a market-wide round-robin basis.

Appointment. The ODR Institution appoints a sole independent and neutral conciliator from its panel, with relevant qualifications and no connection to either party, within 5 days of receiving the reference.

Duration. The conciliator holds one or more meetings aiming at an amicable settlement within 21 calendar days of appointment, extendable by up to 10 calendar days with the parties' consent recorded in writing/electronically.

Outcomes.

• Success: a settlement agreement, executed and stamped online.
• Failure: the conciliator ascertains the admissible claim value payable to the investor and notifies the parties, the ODR Institution and the MII. The investor may then pursue online arbitration; a market participant wishing to arbitrate must first deposit 100% of the admissible claim value with the MII.

Fees. Conciliation fees may be borne by the MIIs and recovered from the market participant against whom the complaint is raised, or borne directly by the market participant if it initiates. They cannot be shifted to the investor. Late fee: Rs 1,000 if conciliation is initiated more than six months after the transaction/dispute, payable by whoever initiates.

A market participant can start it too, after giving the investor at least 15 calendar days' notice.

Illustrative dates and amounts; the timelines are the workbook's.

Imran complains that his broker squared off his positions without a margin call, costing him Rs 2,40,000. The broker's reply does not satisfy him, and on 2 March he files on SMART ODR.

At the last meeting the broker offers Rs 1,00,000 and Imran holds out. Conciliation is unsuccessful. The conciliator determines an admissible claim value of Rs 1,60,000 and notifies both sides, the ODR Institution and the exchange.

Now: Imran may start online arbitration. If the broker wants to arbitrate, it must first deposit the full Rs 1,60,000 with the exchange. Imran pays no conciliation fee. Had he waited more than six months after the square-off to start, the initiator would have owed a Rs 1,000 late fee.

Chapter 7 (Investor Grievances and Arbitration) covers conciliation in section 7.3.6, fees in 7.3.7, and repeats its timelines in the ODR flow table at the end of 7.3. Questions test the sequence (MII review, then conciliation, then arbitration), the 21 + 10 day window, who appoints the conciliator (the ODR Institution), the admissible claim value it produces, and the Rs 1,000 late fee after six months.

• Conciliation comes before arbitration, not after it.
• 21 calendar days, extendable by at most 10, and only with the parties' consent.
• One sole conciliator, appointed by the ODR Institution within 5 days - not by SEBI or the exchange.
• Failed conciliation produces the admissible claim value that anchors the broker's 100% deposit.
• The investor never bears conciliation fees.
• Late fee is Rs 1,000 after six months from the transaction/dispute - payable by whichever side initiates.
• The MII's own 21-day review precedes conciliation. Do not add the two 21-day windows into one.