Sebi May See More Investor Complaints after FMC Merger: Study

With the FMC merger imminent, Sebi needs to be pro-active to deal with possible investor
complaints involving commodity bourses that have semi-urban and rural clientele, says a study.

The suggestion is part of a study on 'Effectiveness of Sebi's Complaints Redress System (SCORES) in India' conducted by Sebi's Development Research Group (DRG).

The study also observed that "good news" about the capital market regulator's performance in securities dispute resolution is not getting across the market.

According to the study, once FMC comes under the regulatory portfolio of Sebi, it is quite possible that the magnitude of complaints could escalate.

"It is recommended that Sebi be pro-active and undertake a detailed study of the likely source of dispute so that its staff and institutional mechanism can handle prospective disputes involving commodity exchanges which have semi-urban and rural clientele," it said.

Commodities market regulator Forward Markets Commission's (FMC) merger with Sebi will be effective from September 28.

Noting that communication strategy is crucial in building the reputation of the regulator, the study said that Sebi's good record with respect to SCORES has "hardly been noticed in the market (and) rather the market has been focusing on the bad news".

Citing extant literature, the study further said that if an agency enjoys good reputation, it can afford to keep silent since most of the criticism would not tarnish its image.

"Sebi has built a good reputation in recent years in the securities market but the fact that the good news about Sebi performance in securities dispute resolution is not getting across the market it is important to have a balanced approach.

"In this regard, the role of social media could be useful," it noted.

Besides, the study has suggested that the Securities and Exchange Board of India (Sebi) could use social media extensively for investor education as well as for communicating the good news about it.

"This requires a re-evaluation of the current strategy. Moreover, Sebi should consider outsourcing the satisfaction surveys to credible and independent third-parties so that outcome of satisfaction surveys become more credible," it added.

Meanwhile, the study said that Sebi's online complaint filing system SCORES has achieved a redressal rate of 96 per cent, which is one of the highest among regulators worldwide.