APPOINTMENT OF OMBUDSMAN FOR THE SECURITIES MARKET
The Securities and Exchange Board of India regulates the capital markets owned by the Government of India. It is a statutory corporation entrusted with the responsibility of protecting the interests of the investors by enforcing certain rules and regulations.
Section 11 of the SEBI Act states that it is the duty of the Board to protect the interests of the investors. But SEBI had been receiving various complaints against listed companies and the intermediaries pertaining to the deficiency in services and increasing number of malpractices. Thus, the Securities and Exchange Board of India (Ombudsman) Regulations, 2003, a cheap, informal, and fast alternative redressal mechanism came into force.
Ombudsman was introduced in the securities market for the purpose of resolving disputes between investors and intermediaries or listed companies. The Ombudsman is also required to adjudicate the disputes if the parties do not reach on a settlement.
The Regulations provide that the Board may appoint one or more ombudsmen with the recommendations of a Selection Committee. The members of the Selection Committee have to be nominated by the Chairman of the Board. The members of the Committee are as follows:
- An expert in the area relating to financial market operations- Member.
- A person having special knowledge in areas of law, finance, or economics- Member.
- A representative of the Board, who is not below the rank of Executive Director- Secretary.
The following are the qualifications of an Ombudsman:
- a citizen of India, not below the age of 45 years, having high moral integrity, and
- either a retired judge of a District Court or a person qualified to be a Judge of a District Court, or
- a person having special knowledge and experience in areas relating to law, economics, finance, management or administration for at least ten years, or
- a person having at least ten years of experience of working at a regulatory body, or
- an office bearer of investors’ association for at least ten years.
A person is disqualified from being appointed as an Ombudsman if he:
- is an undischarged insolvent,
- has been convicted of an offense involving moral turpitude,
- has been declared to be of unsound mind by a competent court,
- has been charge-sheeted for an economic offense,
- has been a whole-time director of an intermediary or a listed company, and a period of 3 years has not elapsed.
An ombudsman shall be appointed for a term of 3 years and he is eligible for reappointment for a term of 2 more years. No person can hold the office of an ombudsman after attaining the age of 65 years.
The Board has the authority to terminate the services of an ombudsman before the completion of his tenure, but the Board is required to provide a three- month notice for the same. The Ombudsman also has the right to resign from his office before the completion of his services.