Online Dispute Resolution

Say an investor and a portfolio manager disagree. It might be about a fee, an exit load or a trade. The manager's own complaint process does not fix it. The investor now needs somewhere to go that is cheaper and faster than a court.

Online Dispute Resolution (ODR) is that place. SEBI made it compulsory for all intermediaries, including portfolio managers. It is another way for investors to settle disputes outside court.

Disputes go through the Market Infrastructure Institutions (MIIs). They move in stages, and each stage is more formal than the last:

1. an informal try at settling;
2. a negotiation with a neutral helper;
3. finally, arbitration whose result is binding.

Investors use one online platform for this, called SMART ODR. The first two stages cost the investor nothing.

The legal basis (Chapter 8, section 8.5). Regulation 22A was inserted into the SEBI Portfolio Managers Regulations by the SEBI (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023, with effect from 3 July 2023. All claims, differences or disputes between investors and the portfolio manager arising from its securities market activities must be submitted to a dispute resolution mechanism including mediation and/or conciliation and/or arbitration, per SEBI's procedure.

The three-tier grievance path.

1. Time-bound resolution of the complaint by the intermediary, the MII and through SCORES (the existing framework).
2. If the complainant is not satisfied, the MII-administered dispute resolution process may be initiated.
3. If either party is not satisfied with the arbitration award, it may approach the courts.

The ODR stages.

Access. Investors lodge requests on SMART ODR with any MII; the request is auto-assigned to an MII ODR platform on round-robin logic. Intermediaries must display the portal link on their websites.

Inside the portfolio manager. A compliance officer is responsible for monitoring the redressal of investors' grievances. Chapter 7's Dos list sets a redressal timeline of 21 calendar days from receipt of a complaint.

Illustrative client and dispute; the exit load caps and ODR stages are the workbook's.

Mr Bhatia invested ₹80 lakh in a PMS. Eighteen months later — in his second year — he redeems ₹20 lakh. The portfolio manager deducts an exit load of 3%, ₹60,000.

The workbook's cap for the second year is a maximum of 2% of the amount redeemed, ₹40,000. He believes he has been overcharged ₹20,000.

Had the portfolio manager disputed the dates, the matter would have gone to conciliation (still free) and, failing agreement, to arbitration, whose award binds both sides unless challenged in court.

Chapter 8 (Operational Aspects of Portfolio Managers, 13% weightage), section 8.5, "Redressal of investors grievances". Expect questions on the order of the stages, which stages are free, what makes arbitration different (a binding, enforceable award), the effective date of Regulation 22A, and the round-robin assignment through SMART ODR. The Investor Charter in Chapter 12 lists grievance redressal and how to access it among the items it must cover.

• Order: pre-conciliation → conciliation → arbitration. Courts come only after an arbitration award.
• The first two stages are free for investors. The workbook does not say arbitration is free.
• Conciliation is facilitated negotiation; arbitration produces a binding award. A conciliator does not impose a decision.
• SCORES is part of the first tier, not a replacement for ODR.
• Requests are auto-assigned by round robin — the investor does not choose which MII's ODR platform hears it, though he may approach any MII through SMART ODR.
• Regulation 22A, effective 3 July 2023.
• Grievance timing is stated two ways. Chapter 7 says 21 calendar days; Chapters 8 and 12 say "within the time stipulated by SEBI" without a number.
• Regulation 22A names mediation among the mechanisms, but the ODR stages the workbook describes are pre-conciliation, conciliation and arbitration.