SEBI (INFORMAL GUIDANCE) SCHEME, 2003

Investor protection is one of the most important elements of a thriving securities market or other financial investment institution.

Investors protection is a very popular phrase with all these concerned with regulation of the capital market, stock exchanges, SEBI, MCA, RBI etc. Various Guidelines, Rules and Regulations have been issued in the Legislation to protect the Investor's right.

SEBI (Informal Guidance) Scheme, 2003 deals with various aspects such as the nature of request fees to be accompanied along with letter disposal of request, SEBI disrcretion not request and certain types of request and confidentiality of requests, etc.

The following persons may make a request for informal Guidance under the scheme:

(a) any intermediary registered with the SEBI. 

(b) any listed company. 

(c) any 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 or the Central Listing authority. 

(d) any mutual fund trustee company or asset management company. 

(e) any acquirer or prospective acquirer under the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011. 

The Guidance Scheme, further deals with various aspects such as the nature of request, fees to be accompanied alongwith request letter, disposal of requests, SEBI‟s discretion not to respond certain types of requests and confidentiality of requests etc.

The informal guidance may be sought for and given in two forms:

■ No action letters: SEBI indicates that the Department would or would not recommend any action under any Act, Rules, Regulations, Guidelines, Circulars or other legal provisions administered by SEBI to the Board if the proposed transaction described in a request made under para 6 is consummated. 

■ Interpretive letters: SEBI provides an interpretation of a specific provision of any Act, Rules, Regulations, Guidelines, Circulars or other legal provision being administered by SEBI in the context of a proposed transaction in securities or a specific factual situation. 

The request seeking informal guidance should state that it is being made under this scheme and also state whether it is a request for a no action letter or an interpretive letter and should be accompanied with a fee of ` 25,000/- and addressed to the concerned Department of SEBI. It should also describe the request, disclose and analyse all material facts and circumstances involved and mention all applicable legal provisions. SEBI may dispose off the request as early as possible and in any case not later than 60 days after the receipt of the request. The Department may give a hearing or conduct an interview if it feels necessary to do so. The requestor shall be entitled only to the reply. The internal records or views of SEBI shall be confidential.

SEBI may not respond to the following types of requests:

(a) those which are general and those which do not completely and sufficiently describe the factual situation;

(b) those which involve hypothetical situations;

(c) those requests in which the requestor has no direct or proximate interest;

(d) where the applicable legal provisions are not cited;

(e) where a no action or interpretive letter has already been issued by that or any other Department on a substantially similar question involving substantially similar facts, as that to which the request relates;

(f) those cases in which investigation, enquiry or other enforcement action has already been initiated;

(g) those cases where connected issues are pending before any Tribunal or Court and on issues which are subjudice; and,

(h) those cases where policy concerns require that the Department does not respond. 

Where a request is rejected for non-compliance, the fee if any paid by the requestor shall be refunded to him after deducting therefrom a sum of ` 5,000/- towards processing charges. However SEBI is not be under any obligation to respond to a request for guidance made under this scheme, and shall not be liable to disclose the reasons for declining to reply the request. 

Confidentiality of Request (Dec 2016)

Any person submitting a letter or written communication under this scheme may request that it receive confidential treatment for a specified period of time not exceeding 90 days from the date of the Department‟s response. 

The request shall include a statement of the basis for confidential treatment. 

If the Department determines to grant the request, the letter or written communication will not be available to the public until the expiration of the specified period. 

If it appears to the Department that the request for confidential treatment should be denied, the requestor will be so advised and such person may withdraw the letter or written communication within 30 days of receipt of the advise, in which case the fee, if any, paid by him would be refunded to him. 

In case a request has been withdrawn under clause (c), no response will be given and the letter or written communication will remain with the SEBI but will not be made available to the public. 

If the letter or written communication is not withdrawn, it shall be available to the public together with any written staff response.

A no action letter or an interpretive letter issued by a Department constitutes the view of the Department but will not be binding on SEBI, though the SEBI may generally act in accordance with such a letter. 

The letter issued by a Department under this scheme should not be construed as a conclusive decision or determination of any question of law or fact by SEBI. Such a letter cannot be construed as an order of SEBI under Section 15T of the Act and shall not be appealable. 

Where a no action letter is issued by a Department affirmatively, it means that the Department will not recommend enforcement action to the Board, subject to other provisions of this scheme.