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Investors engaged in share tradingare not consumers, says Sebi

Sebi says such cases fall under the purview of commercial transactions and will not fall within the scope of the Consumer Protection Act

Investors who lose money while trading in the stock market based on the recommendations provided by their broker cannot drag the brokerage firms to the consumer court, the Securities and Exchange Board of India (Sebi) has reiterated. Such cases fall under the purview of commercial transactions, Sebi added.
Sebi has clearly laid down the framework for investor redressal and every exchange has an arbitration panel in place to hear such investor complaints.

In a notice issued to all its trading members on Wednesday, BSE Ltd said the exchange has received a letter from Sebi regarding cases filed by clients against stock brokers in various consumer forums.

“As stated in the said Sebi letter, it may be noted that as per settled law, regular trading in shares to earn profits are in the nature of commercial transactions. Where a person engages a broker for the purpose of regular purchase and sale of shares, it falls within the scope of ‘commercial purpose’. Hence, any dispute arising solely out of such commercial transactions may not fall within the scope of the Consumer Protection Act, 1986, for the purpose of seeking any relief thereunder,” says the BSE notice.

The notice serves as a reminder to investors as there have been quite a few such cases in the past.

 Note: It would be pertinent to note where that the pivotal criteria is the term "regular". Any person buys from the stock market with the intention to sell one day. Therefore, it can be argued that an investor occasionally buying/selling his portfolio can still approach the consumer forum.

 Article referred: http://www.livemint.com/Money/xPetnKIo7Gbqm3lsTiBgSO/Investors-cannot-drag-their-brokers-to-consumer-courts-says.html

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