9 Empowering Investors: Debenture Trustees' Grievance Redressal Mechanisms

Key Takeaways:

- Debenture trustees must prominently display grievance redressal mechanisms and contact information for investors.

- Dedicated email IDs and SEBI's SCORES platform facilitate efficient grievance reporting and tracking.

- Strict timelines are imposed for acknowledging, investigating, and resolving investor complaints.

- Debenture trustees are required to disclose complaint data and resolution status on their websites regularly.

- Collaboration with SEBI and stock exchanges ensures effective oversight and investor protection.

Detailed Narrative:

Recognizing the paramount importance of investor protection, this chapter outlines comprehensive guidelines for debenture trustees to establish robust grievance redressal mechanisms. These mechanisms aim to empower investors by providing accessible channels for voicing their concerns and ensuring prompt and effective resolution.

At the forefront of this initiative is the requirement for debenture trustees to prominently display grievance redressal information in their offices. This includes contact details of the compliance officer, CEO/partner/proprietor, and clear instructions on how investors can lodge complaints. Investors are encouraged to escalate unresolved grievances to SEBI through the SCORES (SEBI Complaints Redress System) platform, ensuring a multi-layered approach to grievance handling.

To streamline the grievance reporting process, debenture trustees must designate a dedicated email ID specifically for receiving investor complaints. This email ID should be prominently displayed on the trustee's website and promotional materials, ensuring easy accessibility for investors.

Timely resolution of grievances is a critical aspect of this framework. Debenture trustees are mandated to acknowledge and initiate efforts to resolve complaints within 30 days of receipt. They must keep complainants informed of the action taken and provide regular updates on the status of their grievances.

Transparency is a cornerstone of this grievance redressal mechanism. Debenture trustees are required to disclose comprehensive data on complaints received, resolved, and pending on their websites on a monthly and half-yearly basis. This includes details such as the source of the complaint, resolution timelines, and reasons for any delays.

Furthermore, debenture trustees must collaborate closely with SEBI and stock exchanges to ensure effective oversight and investor protection. They are obligated to obtain SCORES user IDs and passwords from SEBI, facilitating seamless integration with the regulatory body's grievance redressal platform.

Recognizing the importance of continuous improvement, debenture trustees are encouraged to periodically review and strengthen their grievance redressal mechanisms. This proactive approach ensures that existing shortcomings are addressed and best practices are adopted to enhance investor satisfaction.

FAQs:

Q1: What are the primary channels for investors to lodge complaints against debenture trustees?

A1: Investors can lodge complaints directly with the debenture trustee through dedicated email IDs or by submitting complaints on the trustee's website. Additionally, investors can escalate unresolved grievances to SEBI through the SCORES platform.

Q2. How are debenture trustees held accountable for timely grievance resolution?

A2: Debenture trustees are required to acknowledge and initiate efforts to resolve complaints within 30 days of receipt. They must also disclose comprehensive data on complaints received, resolved, and pending on their websites regularly, ensuring transparency and accountability.

Q3: What is the role of SEBI's SCORES platform in the grievance redressal process?

A3: The SCORES platform serves as a centralized grievance redressal system for investors to escalate unresolved complaints against debenture trustees. Debenture trustees are mandated to obtain SCORES user IDs and passwords from SEBI to facilitate seamless integration and effective oversight.

Q4: How does the grievance redressal mechanism ensure investor protection?A4: The grievance redressal mechanism empowers investors by providing accessible channels for voicing concerns, mandating timely resolution, ensuring transparency through regular disclosures, and fostering collaboration between debenture trustees, SEBI, and stock exchanges for effective oversight and investor protection.

Key Precedents:

1. SEBI/HO/MIRSD/MIRSD_CRADT/P/CIR/2021/675 dated November 30, 2021 (Investor Charter):

This circular introduced the Investor Charter for Debenture Trustees, detailing the services provided, timelines, rights and obligations of investors, and grievance redress mechanisms. Debenture trustees are required to disseminate the Investor Charter on their websites and display it prominently in their offices.

2. MIRSD/DPS III//Cir-01/07 dated January 22, 2007 (Exclusive email ID for investor complaints):

This circular mandated debenture trustees to designate an exclusive email ID for receiving investor complaints, ensuring a direct and efficient channel for grievance reporting.

3. Circular No. CIR/ OIAE/ 1/ 2014 dated December 18, 2014 (SEBI Complaints Redress System - SCORES):

This circular introduced the SCORES platform, a centralized grievance redressal system for investors to escalate unresolved complaints against debenture trustees. Debenture trustees are required to obtain SCORES user IDs and passwords from SEBI to facilitate seamless integration.

4. CIR/MIRSD/3/2014 dated August 28, 2014 (Grievance Redress Mechanism):

This circular mandated debenture trustees to prominently display their grievance redress mechanisms, including contact details of the compliance officer and CEO/partner/proprietor, in their offices.

The chapter emphasizes the importance of establishing robust grievance redressal mechanisms to protect investor interests and maintain confidence in the debenture market. By mandating accessible channels, strict timelines, transparency, and collaboration with regulatory bodies, debenture trustees play a crucial role in ensuring investor satisfaction and upholding the integrity of the financial system.

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Here's the SEBI's Debenture Trustees' circular's verbatim Chapter IX

Chapter IX: Redress of Investors’ Grievances

The primary obligation on resolution of complaints is that of the issuer. The dispute resolution mechanism administered by stock exchanges covers such listed companies and the holders of debt securities.

1. Investor Charter{27}

1.1. In order to facilitate investor awareness about various activities where an investor has to deal with Debenture Trustees for availing various services, SEBI has developed an Investor Charter for Debenture Trustees, inter-alia detailing the services provided to Investors, timelines for various Debenture Trustee services provided, Rights and Obligations of Investors and Grievance Redress Mechanism.

1.2. In this regard, all the registered Debenture Trustees shall take necessary steps to bring the Investor Charter, as provided at Annex–IXA of this Master Circular to the notice of investors by way of:

a) disseminating the Investor Charter on their websites/through e-mail;

b) displaying the Investor charter at prominent places in offices etc.

1.3.Trustee Association of India (TAI) shall also disseminate the Investor Charter on its website.

1.4. Additionally, in order to bring about transparency in the Investor Grievance Redress Mechanism, it has been decided that all the registered Debenture Trustees shall disclose on their respective websites, the data on complaints received against them or in respect of debt securities issues dealt by them and redress thereof, latest by seventh of the succeeding month, as per the format enclosed at Annex-IXB to this Master Circular.

2. Exclusive e-mail ID to redress of Investor Complaints{28}

In order to address the issue of having a direct and quicker forum for enabling investors to register their complaints expeditiously, a Debenture Trustee shall designate an email ID of the grievance redress division/ compliance officer exclusively for the purpose of registering complaints by investors. It shall display the email ID and other relevant details prominently on its website and in the various materials/ pamphlets/ advertisement campaigns initiated by it for creating investor awareness.

3. Redress of investor grievances through SEBI Complaints Redress System (SCORES) platform{29}

3.1.The Debenture Trustee shall send its details, in the format specified in Annex-IXC of this Master Circular to SEBI in hard copy and by email to scores@sebi.gov.in and obtain SCORES user id and password immediately within a period of one month from the date of registration. The email-id to be furnished by the Debenture Trustee for receiving SCORES user id and password from SEBI has to be preferably a corporate email id and necessarily a permanent one. Failure by any SEBI registered Debenture Trustees to obtain the SCORES user ID and password would not only be deemed as non-redress of investor grievances but also indicate willful avoidance of the same.

3.2.The Debenture Trustee shall submit the details in hard copy (Annex-IXC) to the Department/ Division of SEBI which has granted them registration to operate in the securities market. SCORES user id and password of the Debenture Trustee shall be created only after receiving approval from the concerned Department/ Division of SEBI.

3.3.The Debenture Trustee shall review its investors’ grievances redress mechanism so as to further strengthen it and correct the existing shortcomings, if any. The SEBI registered Debenture Trustee to whom a complaint is forwarded through SCORES, shall take immediate efforts on receipt of a complaint, for its resolution, within thirty days. The SEBI registered Debenture Trustee shall keep the complainant duly informed of the action taken thereon.

3.4.The Debenture Trustee shall update the ATR along with supporting documents, if any, electronically in SCORES. ATR in physical form need not be sent to SEBI. The proof of dispatch of the reply of the SEBI registered Debenture Trustee to the concerned investor should also be uploaded in SCORES and preserved by the SEBI registered Debenture Trustee, for future reference.

3.5.Action taken by a Debenture Trustee will not be considered as complete if the relevant details/ supporting documents are not uploaded in SCORES and consequently, the complaints will be treated as pending.

3.6.A complaint shall be treated as resolved/ disposed/ closed only when SEBI disposes/ closes the complaint in SCORES. Hence, mere filing of ATR by a Debenture Trustee with respect to a complaint will not mean that the complaint is not pending against them.

3.7.Failure by a Debenture Trustee to file ATR under SCORES within thirty days of date of receipt of the grievance shall not only be treated as failure to furnish information to SEBI but shall also be deemed to constitute non-redress of investor grievance.

4. Dissemination of Information regarding Grievance Redress Mechanism{30}

For information of all investors who deal/ invest/ transact in the market, the following shall be prominently displayed in the offices of Debenture Trustees:

Dear Investor,

In case of any grievance / complaint against the Intermediary:

Please contact Compliance Officer of the Intermediary (Name and Address) / email-id (xxx.@email.com) and Phone No. - 91- XXXXXXXXXX.

You may also approach CEO / Partner / Proprietor (Name) / email id (xxx.@email.com) and Phone No. - 91-XXXXXXXXXX.

If not satisfied with the response of the intermediary, you can lodge your grievances with SEBI at http://scores.gov.in or you may also write to any of the offices of SEBI. For any queries, feedback or assistance, please contact SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575

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Annex–IXA

INVESTOR CHARTER – DEBENTURE TRUSTEES

1. Vision and Mission Statement for Investors

Vision:

• Strive to protect the interest of investors in debt securities by acting as a trusted Debenture Trusteeship service provider.

Mission:

• To safeguard the interests of the investors in listed debt securities through adherence to regulatory guidelines.

• To achieve highest level of operational efficiencies through well-defined internal processes and domain expertise.

2. Details of services provided by Debenture Trustee.

• Facilitating documentation, exercising due diligence and timely creation of security for debt securities.

• Ensuring creation of securities by the Issuer and holding of security including safe custody of documents.

• Monitoring of payment of interest/redemption of principal.

• Monitoring security cover and other financial covenants.

• Dissemination of rating revision/ payment of interest/ redemption information by disclosing on Trustee’s website/ with Credit Rating Agencies/ Stock Exchanges

• Timely and Effective resolution of investor complaints.

• Ascertain that the debentures have been converted or redeemed in accordance with the conditions under which they were offered to the investors.

• Enforcement of security as per terms of issue/ regulatory guidelines.

• Appoint a nominee director on the Board of the Issuer in case of event of default.

• Exercise due diligence to ensure compliance with the provisions of the Companies Act, 2013, the SEBI Regulations and the debenture trust deed by the Issuer.

3. Guidance pertaining to timelines for various services provided

4. Guidance pertaining to special circumstances

BREACH OF COVENANT AND/OR EVENT OF DEFAULT

The Debenture Trustee shall take following steps in case of breach of covenants or terms of issue and/or event of default:

a) send a notice to the investors within 3 days of breach of covenants or terms of issue and/or event of default.

b) convene the meeting of investors within 30 days of breach of covenants or terms of issue and/or event of default.

c) to enforce security or enter into the Inter Creditor Agreement or as decided in the meeting of investors.

5. Rights and Obligations of Investors

Investor Right – Right to

a) Inspect debenture trust deed, to obtain copy of debenture trust deed and related documents as per prevailing state stamp laws.

b) Receive notice of any change in terms of debt securities including rollover, redemption etc. or of breach of covenants and/or event of default from debenture trustees.

c) of compromise or arrangement, to sanction any variation in the rights of the investors and to sanction any compromise or arrangement proposed to be made between the Issuer and investor(s)

d) Call for a meeting to be convened by the debenture trustee on requisition in writing signed by investors holding at least 1/10th in value of the debentures for the time being outstanding.

e) To lodge complaints with respect to their debt securities including non-receipt of interest and or principal etc. with Debenture Trustee.

f) Receive information from Issuers as per SEBI Regulations and Companies Act, 2013.

Investor Obligations – under obligation to

a) Read the information memorandum and debenture trust deed carefully before taking investment decision.

b) Keep updated record with Depository Participant including bank details, address, email ID of first holder, PAN etc. at all times.

c) Keep themselves updated with all information on public domain such as, debenture trustee website, Stock Exchange, India bond Info etc. and any other platform introduced from time to time.

d) Participate in the meeting called by the Debenture Trustee.

e) Cooperate with debenture trustee and provide information to debenture trustee

f) Respond to debenture trustee’s requests/ letters/ notices with clear and specific mandate within the time period specified in the letter/ notice by the debenture trustee.

6. Details of grievance redress mechanism

6.1 Investor shall check the website of debenture trustees for the dedicated grievance email ID and other relevant details of the grievance redress division/compliance officer for the purpose of registering grievances/ complaints and any enquiry.

6.2 For lodging the grievance, the investor can write to the debenture trustee’s dedicated grievance email ids or letter or can directly lodge complaints on the link provided by Debenture Trustee on its website.

6.3 While lodging a complaint it is necessary for investor to mention following:

a) Nature of Complaint

b) Name of Issuer Company

c) Holding details including ISIN

d) Full Name of Debenture Holder

e) PAN

f) Correct Email ID

6.4 Upon receipt of the complaint, the Debenture Trustee after due verification shall send intimation of redress/ resolution of complaint via email / letter as applicable within the timeline.

6.5 In case a complaint is required to be escalated to the issuer by the debenture trustee, the same shall be escalated within seven days of receipt of complaint.

6.6 If the investor is not satisfied with the redress/resolution of the complaint by the debenture trustee, or the issuer, investor can lodge the complaint on the SEBI Complaints Redress System - SCORES (https://scores.gov.in/) or harness the dispute resolution mechanism specified by SEBI from time to time with respect to the Issuer.

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Annex-IXB

Data of complaints against Debenture Trustee to be displayed on its website- Format for disclosing of data of complaints on its website:

1. Data for the month ending

*Should include complaints of previous months resolved in the current month, if any.

**Should include total complaints pending as on the last day of the month, if any. ^Average resolution time is the sum total of time taken to resolve each complaint in the current month divided by total number of complaints resolved in the current month.

2. Month – wise complaints data on half yearly basis:

3. Trend of annual (Financial Year) disposal of complaints (for 5 years on rolling basis)

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Annex-IXC

AUTHENTICATION FOR SCORES BY SEBI REGISTERED DEBENTURE TRUSTEE

1. Name of SEBI registered Debenture Trustee:

2. Nature of registered intermediary:

3. SEBI registration no.

4. PAN of SEBI registered Debenture Trustee:

5. Date of SEBI registration of Debenture Trustee

6. SEBI registration valid up to:

7. Office address of the intermediary:

8. The details of the concerned person of the Debenture Trustee to whom User id and password will be sent:

Name:

Designation:

Email id: (corporate and permanent email id) Mobile no.

Telephone No.:

Fax No.:

Place:

Date:

Signature:

Name:

Designation: Seal:

Note: A scanned copy to be sent by email to scores@sebi.gov.in followed by hard copy to the concerned Department/Division of Securities and Exchange Board of India, Plot No. C4-A, 'G' Block, Bandra Kurla Complex, Mumbai -400 051

Important: Please note that SCORES has the provision for updating SEBI registered Debenture Trustee's details by the intermediary itself. Any field (except the e-mail id which is permanent) such as registered office address, name/details of the compliance officer, telephone numbers, etc. should be changed by the SEBI registered Debenture Trustee immediately when warranted.

Note:-

{27}SEBI/HO/MIRSD/MIRSD_CRADT/P/CIR/2021/675 dated November 30, 2021

{28}MIRSD/DPS III//Cir-01/07 dated January 22, 2007

{29}Circular No. CIR/ OIAE/ 1/ 2014 dated Dec 18, 2014

{30}CIR/MIRSD/3/2014 dated August 28, 2014;