SEBI’s New Investor Charter: A Game Changer for Stockbrokers

The Securities and Exchange Board of India (“SEBI”) has issued a circular on February 21, 2025, updating the Investor Charter for Stockbrokers to enhance financial consumer protection, inclusion, and literacy. The circular mandates the broker to disclose the investor charter and complaint data to its clients and further outlines the rights and services provided to investors, along with grievance redressal mechanisms.

The objective of the charter is to uphold the highest standards of ethics and compliance, fostering fair and transparent trading to generate wealth for investors. It also aims to deliver exceptional service through innovation and technology, maintain trust and integrity, ensure transparency, protect investors’ interests, and safeguard confidential information, unless disclosure is required by law.

The services provided by the stockbrokers to investors includes executing trades, issuing contract notes, managing margin payments, facilitating early pay-in obligations, periodic settlement of funds, issuing retention statements, risk management, updating client profiles, sharing market information, providing rights and obligations documents, communicating important terms, and addressing grievances.

Investors have the right to receive information about the person handling their account, understand investment risks and costs, receive account forms and terms, access funds, understand charges, discuss grievances, close accounts online, receive policy copies, not face discrimination, receive compliant advertisements, be compensated in case of broker defaults, trade in derivatives, receive warnings on trading systems, access services if differently abled, access educational materials, deal with multiple brokers, and access an escalation matrix.

Investors should read all documents before signing, register contact details, receive contract notes, verify trade details, retain documents, and approach relevant authorities for grievances. They should not deal with unregistered brokers, leave blanks in forms, submit incomplete forms, transfer funds to individuals, share passwords, fall for guaranteed returns schemes, or follow herd mentality.

Key activities have specific timelines, such as KYC entry within 3 days, client onboarding within a week, order execution on the same day, issuing contract notes within 24 hours, and resolving grievances within 21 days.

Investors can file complaints with stockbrokers or exchanges, use the SCORES 2.0 system, or the SMARTODR platform for online dispute resolution. The circular provides for a four-step investor grievance redressal aimed at safeguarding the rights of investors. The process includes reviews, conciliation, and arbitration, with specific timelines for each step. It also provides information on the Online Dispute Resolution (ODR) portal and the handling of investor claims in case of default of a stockbroker. The charter aims to promote fair and transparent trading practices and protect the interests of investors in the securities market.

Stockbrokers are required to disclose complaint data on their websites, including the format for investor complaints and the trend of monthly/annual disposal of complaints. In its annexure, the circular provides a format for investor complaints data and trend of monthly/annual disposal of complaints to be displayed by stockbrokers on their respective websites.

The previous Investor Charter issued in December 2021 outlined the services provided to investors, their rights, and the grievance redressal mechanism. The recent 2025 update builds upon this foundation by introducing specific timelines for key activities, such as KYC entry within 3 days, client onboarding within a week, order execution on the same day, issuing contract notes within 24 hours, and resolving grievances within 21 days. Additionally, the mandatory disclosure of complaint data and the introduction of the ODR platform are significant enhancements aimed at improving transparency and efficiency in addressing investor grievances.

The circular is available here and comes into effect immediately. It replaces the previous circular dated December 2, 2021, and amends the Clause 75 of Master Circular for Stockbrokers dated August 9, 2024.

We hope you have found this information useful. For any queries/clarifications please write to us at insights@elp-in.com  or write to our authors:

KC Jacob, Counsel, Email – kcjacob@elp-in.com

Shourya Tanay, Senior Associate – Email – shouryatanay@elp-in.com