SCORES

An investor with a grievance against a listed company or a SEBI-registered intermediary has one front door, and it is not a letter. It is SCORES — the SEBI Complaints Redress System, introduced by SEBI Circular No. CIR/OIAE/2/2011 dated June 3, 2011.

The idea is simple and it is mostly about visibility. Before SCORES a complaint disappeared into a postbag and the investor had no way of knowing whether anybody had read it. SCORES makes four things happen at once:

• a centralised database of all complaints
• online movement of each complaint to the concerned listed company or intermediary
• online upload of Action Taken Reports by that company or intermediary
• online viewing by the investor of what was done and where the complaint currently stands

That last line is the whole point. The entity cannot quietly do nothing, because doing nothing is visible.

Every merchant banker is issued a user id and password for the SCORES website. The workbook is explicit about the obligation that comes with it: the merchant banker is expected to log in on a daily basis to check for new complaints uploaded by SEBI, initiate steps to resolve them at the earliest, and submit an Action Taken Report (ATR) in respect of each such complaint.

The clock is set by the Merchant Bankers Regulations, and it runs in calendar days, not working days:

• as a condition of registration, the merchant banker shall take adequate steps for redressal of investor grievances within 21 days of the date of receipt of the complaint, and keep SEBI informed of the number, nature and other particulars of complaints received;
• the grievance redressal obligation in Chapter 3 repeats it — grievances shall be redressed promptly but not later than twenty-one calendar days from the date of receipt.

What SCORES covers. Complaints arising out of issues under the SEBI Act, the Securities Contracts (Regulation) Act, the Depositories Act and the rules and regulations made under them, and matters covered by section 26 of the Companies Act.

What is not treated as a complaint at all — seven categories: complaints that are incomplete or not specific; allegations without supporting documents; requests for suggestions, guidance or explanation; asking why shares are not trading or are illiquid; dissatisfaction with the trading price of a company's shares; non-listing of shares of a private offer; and disputes arising out of a private agreement with a company or intermediary.

What SEBI does not deal with at all — three categories: complaints against unlisted, delisted, wound-up, liquidated or sick companies; matters that are sub-judice, meaning already before a court or in quasi-judicial proceedings; and anything falling under another regulator (RBI, IRDAI, PFRDA, CCI) or another ministry (MCA).

SCORES is not the end of the road. Separately, all claims, differences or disputes between a merchant banker and its client arising out of its securities-market activities must go to a dispute resolution mechanism that includes mediation and/or conciliation and/or arbitration, in the manner SEBI specifies.

A retail investor applies in a mainboard IPO through ASBA for 650 shares at the cap price of Rs 160, so Rs 1,04,000 is blocked in her bank account on 4 September. The basis of allotment is finalised on 12 September and she gets nothing. By 20 September the block is still on her account and the money is unusable.

The complaint routes to the lead manager, not to the exchange — and correctly so, because the lead manager's post-issue responsibility runs until every applicant has received securities in the demat account or a refund of application money, and listing or trading permission is obtained. The merchant banker sees it the next morning on its daily login, has the SCSB release the block, and uploads the ATR with the release reference.

The rupee consequence of getting this wrong is set out in Chapter 5. Where the issuer becomes liable to repay application money and does not do so within four days, the issuer and every director who is an officer in default become jointly and severally liable to repay the money with interest at fifteen per cent per annum. On this one application that is small — Rs 1,04,000 × 15% × 12/365 ≈ Rs 513 — but a 4,80,000-application issue with Rs 500 crore of unreleased blocks carries Rs 500 crore × 15% × 12/365 ≈ Rs 2.47 crore of interest for twelve days of delay, before SEBI has said a word about the merchant banker's code of conduct.

Chapter 3 (Registration, Code of Conduct & General Obligations of Merchant Bankers in India) names "Investor grievance redressal and SCORES mechanism" as one of its three learning objectives, and the chapter's own review questions end with a SCORES true/false: "SCORES system of SEBI does not deal with any complaints which fall under the purview of the other regulatory bodies i.e. IRDAI, PFRDA etc." — True.

Expect the exclusion lists to be tested as True/False or "which of the following is not a complaint in SCORES", and expect the 21-day redressal period to be tested as a number. Both the exclusions and the 21 days are exam-favourite facts because they are short, closed and easy to mis-remember.

• Twenty-one calendar days, not working days. The workbook says "twenty-one calendar days" in the grievance redressal rule and "21 days" in the registration conditions — the same period, counted straight through weekends.
• "Not satisfied with the trading price" is not a complaint. Neither is "why are these shares illiquid". SCORES redresses grievances; it does not review the market's opinion of a share.
• Sub-judice matters are out. Once a court or quasi-judicial forum is seized of the matter, SEBI does not deal with it in SCORES.
• Another regulator's subject is out, not merely deprioritised. RBI, IRDAI, PFRDA, CCI and the MCA each keep their own redress; SCORES does not forward.
• A complaint against a delisted or wound-up company is out — which is exactly when an aggrieved investor most wants to file one.
• SCORES is not arbitration. The merchant banker's disputes with its clients go to the separate mediation / conciliation / arbitration mechanism SEBI specifies; SCORES does not decide a claim between two parties.
• The escalation ladder and the auto-routing behaviour of the current portal live on the SCORES 2.0 page and the Action Taken Report page — the Series IX workbook states the 2011 architecture and the 21-day merchant-banker clock, and does not restate the later day counts.