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"SEBI (Informal Guidance) Scheme, 2003" A Quick Overview



Imagine a world where navigating the complex realm of securities market regulations becomes more accessible, transparent, and orderly. The "Securities and Exchange Board of India (Informal Guidance) Scheme 2003" (“Scheme”) does just that.


SEBI had established this Scheme to provide informal guidance to market participants, such as intermediaries, listed companies, mutual funds trustee companies, and others, on matters related to securities market regulations.


Let’s understand some important aspects of this scheme:


1. Eligibility for Seeking Informal Guidance:


The following entities are eligible to seek informal guidance under the scheme:


  • Intermediaries those are registered with SEBI such as stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary who may be associated with securities market.

  • Listed company.

  • Company intending to get its securities listed with the securities market.

  • Mutual Fund Trustee Company or Asset Management Company.

  • Any acquirer who directly or indirectly acquires shares or voting rights in a listed company.


2. Type of Guidance:


There are two forms in which Informal guidance can be sought:

  • No-action letters: These indicate whether SEBI would recommend any action if a proposed transaction described in a request letter is consummated.

  • Interpretive letters: These provide an interpretation of specific provisions of laws or regulations in the context of a proposed transaction or factual situation.

3. Application Requirements:

  • The request letter should clearly state that it is being made under the Scheme.

  • Mention the form of the request letter (i.e., no-action or an interpretive.)

  • An application fee of Rs. 25,000 shall be paid.

  • Address the application to the concerned department of SEBI.

  • Provide a detailed description of the request, including all material facts, circumstances, and applicable legal provisions.

# mode of payment of fees: It can be paid either through i) direct credit to bank account through NEFT/ RTGS/ IMPS; or by ii) online payment using SEBI payment gateway. SEBI may prescribe any other mode if it deems fit.


4. Processing and Response:

  • SEBI aims to respond to requests as early as possible, but not later than 60 days from the receipt of the request letter.

  • The concerned department may give a hearing or call you for interview if necessary.

  • The requestor shall only be entitled to response. The internal views and records shall be kept confidential.

5. Conditions where SEBI may not respond to the queries:

  • General requests and which do not describe the factual situation completely.

  • Situation those are hypothetical.

  • Requests in which there is no direct or proximate interest.

  • The applicable provisions are not cited.

  • Where the non-action or interpretive letter has already been issued by any department on similar questions.

  • Cases where investigation, enquiry or other enforcement action has already been taken.

  • Cases where matters related to query are already filed before the Tribunal or Court and are pending.

  • Situation where the Department of SEBI deems fit not to respond due to policy concerns.

Note:

(i) In case where SEBI rejects the application, then the amount paid shall be refunded after deducting an amount of Rs. 5,000/- towards processing fees.

(ii) SEBI is not bound to respond to request raised and further shall not be liable to give any reasons for rejection of the request.


6. Important points to consider:

  • The requestor can request confidential treatment for a specified period (not exceeding 90 days) from the date of the Department's response.

  • If the request is granted, the letter or communication will not be available to the public during the specified period but where the request is rejected the requestor will have the option to withdraw the request within 30 days of the request being rejected. The amount paid in such case shall be refunded to the requestor.

  • SEBI is not liable for any loss or damage resulting from non-response or a different view taken by the Board in the future.

  • In case SEBI finds out that a letter is obtained by way of committing any fraud or misrepresentation, it may declare the letter as invalid, and the case will be treated as if the letter was never issued.


To conclude SEBI through this Scheme has made it amply clear as to what they are expecting when you are seeking informal guidance. The regulations may have different interpretations and at times might confuse the registered intermediaries, hence it is important to seek guidance if you are not sure about any provisions of the regulation.



This Article is written by CS Priyanka Bhadouria, Associate at Anjali Bansal & Associates. Hope the article was useful to you. In case of any queries or clarifications, please write to me at anjalibansalcs@gmail.com


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