If you are associated with the stock market and face any kind of issue or dispute, whether it’s with your stockbroker, a registered advisor, or even a listed company, you have the right to raise your concern with SEBI or the respective stock exchange.
In most cases, such disputes are resolved through the internal grievance redressal mechanism of the exchange or intermediary.
However, if your grievance remains unresolved or the resolution offered is unsatisfactory, you have the option to escalate the matter to arbitration. It is a formal legal process designed to provide time-bound justice without going to court.
Let’s now understand in detail what kinds of matters can be referred to arbitration and when it is the appropriate route to take.
Types of Matters That Can Be Referred to Arbitration
The purpose of arbitration is to provide fair justice in a short period. It prevents you from the unnecessary hustle of court cases of high legal fees.
So, if you want justice regarding stock market disputes, then the following issues can be taken to arbitration if unresolved through the exchange’s investor grievance redressal mechanism:
1. Disputes Related to Trades or Orders
- Unauthorized trades or order placement
- Execution of trades without client consent
- Non-execution of stop-loss orders
- Trades executed at incorrect prices
2. Misuse of Client Funds or Securities
- Broker using client’s securities for proprietary purposes
- Delay or non-return of funds or shares
- Unauthorized pledging or transfer of client holdings
3. Brokerage Churning
- Charging brokerage higher than agreed
- Levying unjustified transaction fees, taxes, or penalties
- Disputes over annual maintenance charges (AMC) or demat account fees
4. Contract Note and Ledger Discrepancies
- Mismatch between contract notes and trade confirmations
- Incorrect client ledger entries
- Forged or manipulated statements
5. Margin-Related Disputes
- Dispute over margin calls or forced square-offs
- Non-transparent calculation of exposure or VAR margins
- Sale of shares without sufficient notice
6. Account Freezing or Suspension
- Freezing of client accounts without due notice
- Unjustified blocking of trades
- Suspension of trading rights without explanation
7. Non-Compliance with SEBI/Exchange Guidelines
- Violation of KYC norms
- Non-disclosure of risk in derivatives
- Breach of circulars or investor protection guidelines issued by SEBI or the exchanges
8. Trading Account Handling with Profit Sharing
- If your broker/subbroker/ registered advisor handles your account.
- If the registered entity offers you a profit-sharing service.
- If a stock advisor charges more.
These matters pass from several steps of arbitration proceedings in India and generally takes 4-6 months to finally declare award or judgement.
What Matters Cannot Be Referred to Arbitration?
Some disputes are not covered under exchange arbitration. Such cases must be addressed through consumer courts, civil courts, or other legal mechanisms:
| Non-Arbitrable Matters | Where to Resolve Them |
|---|---|
| Disputes with PMS, AIFs, or Mutual Fund Distributors | SEBI, Consumer Court, or Civil Court |
| Investment advice fraud by non-registered entities | SEBI SCORES, Cyber Cell, Police |
| Criminal matters (fraud, forgery, cheating) | Police, Economic Offences Wing, or Criminal Court |
| Disputes outside the jurisdiction of stock exchanges | Civil Courts or SEBI |
| Disputes with fintech apps or unregulated platforms | RBI, SEBI, or Consumer Forums |
Conclusion
Not every financial grievance can be referred to arbitration. Understanding the scope of arbitrable matters helps you save time and direct your complaint to the right forum.
If your issue involves unauthorized trades, misuse of funds, or brokerage malpractice within a recognized stock exchange, arbitration can be an effective legal remedy.
For cases involving fraud, investment scams, or disputes with unregulated entities, alternate legal routes such as SEBI SCORES or civil litigation may be more appropriate.
If you’re unsure whether your case qualifies for arbitration, reach out to us. We will provide details and guide you with the process involved in filing an arbitration.
