SEBI (INFOMAL GUIDANCE) SCHEME 2003

In the interest of better regulation of and orderly development of the securities market, SEBI has issued a scheme called “Securities and Exchange Board of India (Informal Guidance) Scheme 2003” under section 11(1) of SEBI Act, 1992, which came into effect from 24^th June, 2003. 
This is a formal scheme with detailed procedure for providing Informal Guidance.

Eligibility

The persons eligible for seeking informal guidance under the said scheme are:-

• Intermediary registered with the board under Section 12 of the SEBI Act, 1992 i.e. merchant banker, stock-broker, banker to an issue etc.;
• Listed Company;
• Company which intends to get any of its securities listed and which has filed either a listing application with any stock exchange or a draft offer document with the board;
• mutual fund trustee company
• acquirer or prospective acquirer under takeover code

Forms of Informal Guidance

• No-action letters: In such a letter the concerned department  of SEBI would indicate that the said Department may or  may not recommend any action under any Act, Rules, Regulations, Guidelines, Circulars or other legal provisions administered by SEBI.

• Interpretive letters: The other category of letters that could be issued by a department of SEBI would provide an interpretation of a specific provision of any Act, Rules, Regulations, Guidelines, Circulars or other legal provision being administered by SEBI. The interpretation would be given in the context of a proposed transaction in securities or a specific factual situation.

Timeline for providing Informal Guidance

SEBI has to dispose of the request within 60 days after receiving the request. If necessary, the concerned SEBI department may give hearing or conduct an interview.

Legal Effect

Letter issued by a department of SEBI is the view of that department but the same is not binding on the SEBI and where a requestor or person suffered any loss or damage on account of the SEBI taking a different view from that taken in letter already issued under the scheme, in that case SEBI shall not be held liable, however, generally SEBI act in accordance with such letter.

Further, letter issued by a department of SEBI under the scheme is not to be taken as a conclusive decision of any question of law or fact by SEBI. In fact, such a letter cannot be construed as an order of the board under Section 15T of the SEBI Act and as such will not be appealable.

A person making a request to any department of SEBI under the Scheme will have to ensure that proper and complete facts and relevant information are provided. Because any letter issued by any department of SEBI under the Scheme as a result of fraud or misrepresentation of facts by the requestor, would result in such a letter becoming a nullity and of no legal consequence. In addition, the requestor would also be open to legal proceedings by SEBI.

Confidentiality

Request for confidentiality treatment can be made by any person submitting the letter under the scheme and the confidentiality request can be made for a specified period of time of maximum 90 days from the date of the department response.

Department can grant the request and in that case, the letter will not be available to the public until the expiration of the specified period and if, department reject the request, then in that case requestor will be so advised and such person may withdraw the letter within 30 days of receipt of the advise, in which case the fee, if any, paid by him would be refunded to him.

Lastly, one of the important issues raised by the scheme is that whether the response of any department of SEBI can be treated as ‘Informal’; when procedure for making and receiving the request along with the fees has been prescribed by the SEBI.

This Article has been Compiled by Swati Garg (Senior Associate)

You can direct your queries or comments to the author at swati@factumlegal.com

 Disclaimer-

The contents of this article should not be construed as legal opinion. This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this article.