Chapter 33: Annexure – II: Rights and Obligations of Investors

The regulatory framework established by SEBI, the Depositories Act, 1996, and the Securities Contracts (Regulation) Act, 1956 confers comprehensive statutory and contractual rights upon every investor:

1. Rights Relating to Account Operations and Custody

• Right to a Transparent Account: Right to receive a complete copy of the Client Registration Application, KYC documents, and fee schedules upon opening an account.
• Right to Choose Services: Right to select whether to execute a DDPI or authorize each sell transaction independently via e-DIS (TPIN and OTP).
• Right to Safety of Assets: Right to have funds and securities maintained in segregated client accounts, strictly separated from the broker's proprietary capital.
• Right to Free Statements: Right to receive regular holding statements, transaction statements, and Consolidated Account Statements (CAS) without arbitrary charges.

2. Rights Relating to Trade Execution and Settlements

• Right to Best Execution: Right to have orders routed into official exchange matching engines and executed at the best available market prices.
• Right to Timely Contract Notes: Right to receive a digitally signed Electronic Contract Note (ECN) or physical contract note within 24 hours of trade execution.
• Right to Timely Pay-out: Right to receive purchased securities in your demat account and sales proceeds in your bank account within the mandated T+1 rolling settlement schedule.
• Right to Direct Communication: Right to receive direct, unfiltered SMS and email transaction alerts from stock exchanges and central depositories.

3. Corporate and Dispute Rights

• Right to Corporate Benefits: Right to receive all declared corporate dividends, bonus shares, rights entitlements, and annual corporate financial reports.
• Right to Dispute Redressal: Right to access institutional conciliation through exchange ISCs, the SEBI SCORES 2.0 portal, and the SMART ODR arbitration platform.

Alongside legal rights, investors bear fundamental statutory and contractual obligations to maintain the integrity of their accounts and market transactions:

1. Verification and Due Diligence Obligations

• Duty to Deal with Registered Entities: Obligation to verify that any broker, depository participant, or adviser is licensed by SEBI before opening an account or transferring funds.
• Duty to Read Risk Disclosures: Obligation to read and understand the Risk Disclosure Document (RDD) and ensure personal suitability before trading in complex, leveraged products.
• Duty to Maintain Updated KYC: Obligation to promptly inform the broker and DP in writing whenever there is a change in residential address, tax status, bank details, mobile number, or email address.

2. Operational and Financial Obligations

• Obligation to Pay Upfront Margins: Obligation to maintain required cash or collateral margins upfront before placing buy or sell orders.
• Obligation to Meet Settlement Liabilities: Obligation to deliver sold securities and fund buy transactions by the designated pay-in deadlines to prevent short delivery or financial default.
• Prohibition on Cash Transactions: Obligation to route all financial settlements strictly through account-payee electronic banking channels from a verified bank account in the investor's own name.
• Duty to Protect Credentials: Obligation to safeguard login credentials, passwords, and OTPs, and never grant unauthorized access to third parties.

To ensure a balanced marketplace, SEBI mandates that market intermediaries adhere to high fiduciary standards:

• Duty of Loyalty and Fair Treatment: Intermediaries must prioritize the client's interests above their own commercial incentives and avoid conflicts of interest.
• Prohibition of Fraudulent and Unfair Practices: Intermediaries cannot engage in front-running, self-dealing, churning (generating excessive trades solely to collect brokerage), or misleading market tips.
• Prompt Grievance Redressal: Intermediaries are legally required to maintain an active internal compliance cell and resolve investor complaints within statutory deadlines.