I have a piece with Rishabh Jain in today's Financial Express on the promise of SEBI's ombudsman scheme which has never been operationalised till now. The proposed securities code brings it to life with statutory blessing. It would be an important reform which will bring the citizen charter to life. The full piece is as below;
On December 18, 2025, the Finance Minister tabled the Securities Market Code (“SMC”) bill in the Lok Sabha, proposing to consolidate and reform India’s securities legislation, presently contained in three separate statutes. In a step that significantly enhances the jurisdiction and role of the Securities and Exchange Board of India (‘SEBI”), the SMC contains a provision for the Ombudsperson – officers designated by SEBI to resolve investor grievances in relation to deficiency in services rendered by a securities markets service provider (“SMSP”) (viz. an intermediary, a market infrastructure institution (“MII”) or a self-regulatory organisation) or any act or omission of an issuer.
According to the architecture envisioned in the SMC, the investor would first approach an investor grievance redressal mechanism provided or prescribed by SEBI. If the grievance is not redressed within 180 days, the investor may approach the Ombudsperson within 30 days. However, a complaint would not be maintainable before the Ombudsperson if the investor has initiated a proceeding before any court, tribunal, or authority in respect of a matter which is directly or substantially in issue of such complaint.
The “deficiency” in services that may be adjudicated by the Ombudsperson have been defined broadly to mean any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under the SMC, or any rules and regulations made thereunder, or has been undertaken to be performed by an SMSP in pursuance of a contract or otherwise in relation to any service in the securities markets. It includes any act of negligence or omission or commission which causes loss or injury to the investor, as well as deliberate withholding of relevant information to the investor.
If satisfied that the allegations in the complaint are true, the Ombudsperson would redress the complaint and may, by a written order, direct the respondent to comply with its obligations; return the fees, charges or such other amount to the complainant, jointly or severally; or pay such amount as damages to the complainant as may be specified by regulations. The Ombudsperson order would be binding on both the complainant and the respondent.
Further, if the Ombudsperson is of the opinion that the respondent has contravened the securities laws, he may inform SEBI of the same. An Ombudsperson order would not bar SEBI from taking action under the SMC. Ombudsperson orders would be directly appealable to the Securities Appellate Tribunal (“SAT”).
If an SMSP or an issuer/agent fail to comply with an Ombudsperson order, they would be liable to a penalty which would not be less than Rupees ten lakhs but which could extend to three times the unlawful gain made or unlawful loss caused thereby, or to Rupees 100 crores if there is no quantifiable gain/loss or if the gain/loss is less than Rupees 100 crores but the SEBI Adjudicating Officer finds sufficient cause to increase the penalty.
Thus, it is seen that the Ombudsperson, though an officer of SEBI, is envisioned as an independent office exercising judicial powers. The same must be appreciated in light with SEBI’s previous experience with the concept. The SEBI (Ombudsman) Regulations, 2003 (“Ombudsman Regulations”), issued by the SEBI upon the recommendation of the report of the Joint Parliamentary Committee on Stock Market Scam and Matters Relating Thereto.
However, the same could not be operationalized for various reasons. Firstly, SEBI did not have the power to decide a dispute or a lis. Secondly, since SEBI was not clearly empowered under the SEBI Act, 1992 to grant compensation, it could not empower the Ombudsman to do the same. Thirdly, the Ombudsman Regulations did not require the Ombudsman to be a judicial authority, and it was doubtful that a non-judicial authority would be entitled to award compensation. Finally, the Ombudsman Regulations did not provide for an enforcement mechanism to execute the orders of the Ombudsman. Thus, the Ombudsman Regulations were repealed in 2023.
In this backdrop, it is seen that the reintroduction of the Ombudsperson in the SMC is an attempt to operationalize an idea that had been recommended by a Parliamentary Committee over two decades ago but which could not be implemented due to lack of statutory backing. However, certain steps may be taken to further strengthen the mechanism.
Firstly, the SMC does not specify the qualifications of the Ombudsperson. Given that the Ombudsperson is envisioned to act in a judicial capacity, it may be recommended to require in the SMC itself, rather than leaving to regulations, that the Ombudsperson be a person with appropriate legal training and experience.
Secondly, the actions or omissions of the issuer or agent that are subject to the Ombudsperson’s jurisdiction have not been specified. It is recommended that the categories of issuer/agent-investor disputes that are intended to be submitted to the Ombudsperson be clearly defined, so as to avoid conflict of jurisdiction with the company law tribunals.
Thirdly, whereas the body of the SMC contains only three remedies that the Ombudsperson may grant, a Note uses the term “etc.” in relation to such remedies. It is recommended that the Ombudsperson be empowered to grant non-monetary remedies including directions, in order to put the aggrieved in the same place as if the wrong had not happened, or to put in place checks to prevent further wrongs.
Fourthly, it is envisioned that Ombudsperson orders bind only the parties to a dispute. However, in certain cases, third party rights may be affected by the findings in such orders. For instance, if the Ombudsperson finds that a certain pledge on an investor’s shares was created invalidly by a broker, the same would affect the rights of the pawnee. Thus, the Ombudsperson may be permitted to join all necessary and proper parties to the case, and Ombudsperson orders may be made binding on all such parties.
Finally, the procedure applicable to Ombudsperson proceedings has not been specified. The same may lead to ambiguities surrounding the applicability of the Code of Civil Procedure. It would be advisable to explicitly specify that Ombudsperson proceedings would be governed by rules of natural justice, and that Ombudsperson orders would be made public.
The introduction of the Ombudsperson system is a welcome step towards the establishment of a comprehensive system for the resolution of investor grievances in the securities market, an aspiration that SEBI has had for over two decades.
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