sebi

Understanding SEBI's Informal Guidance Scheme 2003 for Securities Market Compliance

Understanding the Securities and Exchange Board of India (Informal Guidance) Scheme 2003

Navigating the complexities of the securities market can be challenging. The Securities and Exchange Board of India (SEBI) addresses this concern through the “Securities and Exchange Board of India (Informal Guidance) Scheme 2003.” This scheme facilitates understanding and fosters transparent interactions regarding regulatory compliance.

SEBI initiated this Scheme to provide informal guidance to various market participants, including intermediaries, listed companies, mutual funds, and others on securities market regulations.

Key Aspects of the Scheme

1. Eligibility for Seeking Informal Guidance

Entities eligible to seek informal guidance include:

  • Intermediaries registered with SEBI, such as stock-brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, and other intermediaries involved in the securities market.
  • Listed companies and companies intending to list their securities.
  • Mutual Fund Trustee Companies or Asset Management Companies.
  • Acquirers who directly or indirectly acquire shares or voting rights in a listed company.

2. Types of Guidance

Informal guidance can be sought in two formats:

  • No-action letters: These letters assess whether SEBI would recommend any actions if the proposed transaction detailed in the request letter is executed.
  • Interpretive letters: These letters provide an interpretation of specific legal provisions or regulations in relation to a proposed transaction or factual scenario.

3. Application Requirements

To apply for guidance, the request letter must include:

  • A clear statement indicating that it is submitted under the Scheme.
  • Specification of the request type (no-action or interpretive).
  • Payment of an application fee of Rs. 25,000.
  • Addressing the application to the relevant SEBI department.
  • A comprehensive description of the request, encompassing all material facts, circumstances, and applicable legal provisions.

Mode of Payment of Fees

The fee can be paid through:

  1. Direct credit to a bank account via NEFT/RTGS/IMPS.
  2. Online payment using the SEBI payment gateway.

SEBI may prescribe additional payment methods as deemed appropriate.

4. Processing and Response

SEBI strives to respond to requests within 60 days of receipt. The concerned department may conduct hearings or interviews if necessary. Only the response to the requestor is entitled, and all internal discussions remain confidential.

5. Conditions for Non-Response

SEBI may choose not to respond to requests under the following conditions:

  • General inquiries lacking a complete factual description.
  • Hypothetical situations.
  • Requests without direct or proximate interest.
  • Absence of cited applicable provisions.
  • Similar queries previously addressed by SEBI.
  • Existing investigations, inquiries, or enforcement actions.
  • Pending matters before the Tribunal or Court.
  • Instances where SEBI opts not to respond due to policy considerations.

Note: If SEBI rejects an application, the amount paid will be refunded after deducting Rs. 5,000 as processing fees. SEBI is not obligated to provide reasons for the rejection.

6. Important Considerations

  • The requestor can ask for confidential treatment for a period not exceeding 90 days from SEBI's response date. If granted, the communication will be unavailable to the public during this time. If rejected, the requestor may withdraw within 30 days for a refund.
  • SEBI is not liable for any loss or damage resulting from non-responses or differing interpretations in the future.
  • If SEBI discovers that a letter was obtained through fraud or misrepresentation, it may be declared invalid, treating it as if it had never been issued.

Conclusion

Through the Informal Guidance Scheme, SEBI clarifies expectations for those seeking informal guidance, acknowledging the potential for varying interpretations of regulations that may confuse registered intermediaries. It is essential to seek assistance if uncertainty arises regarding any regulatory provisions.