Securities and Exchange Board of India (SEBI) has proposed a revised version of its Informal Guidance (IG) Scheme, replacing the existing 2003 framework. This revision aims to streamline the process for issuing clarifications to market participants, enhancing transparency and efficiency. The IG Scheme 2024 expands the eligibility criteria, allowing entities like stock exchanges, clearing corporations, and managers of pooled investment vehicles to seek SEBI’s guidance. Key changes include an increase in application fees from ₹25,000 to ₹75,000 and processing fees from ₹5,000 to ₹15,000, reflecting inflation adjustments. Obsolete references in the 2003 scheme will be removed, and a nodal coordination cell will be established to handle applications via a centralized online platform. Additionally, SEBI will adopt electronic communication, and applicants will be required to respond to clarification requests within 15 days. These updates aim to make the guidance process more accessible and responsive to evolving market needs, ensuring a more efficient regulatory environment.
Securities and Exchange Board of India
Monday 30th September 2024– SEBI Board Meeting
Review of the Securities and Exchange Board of India (Informal Guidance) Scheme, 2003
1. Objective
This Memorandum seeks the approval of the Board to replace the existing Securities and Exchange Board of India (Informal Guidance) Scheme 2003 (“IG Scheme 2003”) with the proposed Securities and Exchange Board of India (Informal Guidance) Scheme, 2024 (“IG Scheme 2024”).
2. Background:
2.1. In order to streamline the process for issuing clarifications sought by market participants, the Board in its meeting held on May 3, 2003, had approved the issuance of IG Scheme 2003 which came into effect from June 24, 2003. Subsequently, the IG Scheme 2003 was amended in 2004 and 2023 to include additional categories of entities eligible to seek the benefit of the scheme and to mandate payment of application fees through digital mode.
2.2. The key features of the IG Scheme 2003 (as amended in 2004 and 2023) are as follows:
2.2.1. Applicants eligible to seek informal guidance: Initially, only listed companies and intermediaries registered with SEBI under Section 12 of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) were eligible to make a request for informal guidance under the IG Scheme. In 2004, the following categories of persons were also made eligible to seek guidance under the IG Scheme 2003, namely:
(i) a 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;
(ii) a mutual fund trustee company or an asset management company; and
(iii) an acquirer or prospective acquirer under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
2.2.2. Nature of guidance: It may be noted that the guidance under the IG Scheme 2003 is given in the following forms:
(i) No-action letter: The department of SEBI indicates whether it would or would not recommend action in terms of the securities laws (including any Act, Rules, Regulations, Guidelines, and Circulars) or any other legal provisions administered by SEBI, in case the proposed transaction is consummated by the applicant.
(ii) Interpretive letter: The department of SEBI provides its interpretation on a specific provision of any securities laws (including any Act, Rules, Regulations, Guidelines, and Circulars) or any other legal provision administered by SEBI, in the context of the proposed transaction.
2.2.3. Requirement for seeking informal guidance: The applicant is required to describe the request, disclose all material facts and circumstances involved and mention all applicable legal provisions and pay a fee of ₹25,000/-.
2.2.4. Time period for answering the informal guidance: In terms of the IG Scheme 2003, SEBI is required to dispose of the request not later than sixty days after the receipt of the request.
2.2.5. Processing of the application for guidance: The departments of SEBI may grant a hearing or conduct an interview, if necessary, of the applicant. The applicant is only entitled to a reply. The internal records, notings and views of SEBI are, however, kept confidential.
2.2.6. Rejection of the request: SEBI may not respond to the request if, inter alia, it is based on a hypothetical situation or where the applicant has no direct or proximate interest. The request may also be rejected, if the applicable legal provisions are not cited or if a guidance has already been issued on a substantially similar question involving substantially similar facts. If the request relates to a matter in which investigation, enquiry or other enforcement action has already been initiated or is pending before any Tribunal or Court, such request shall also be rejected. SEBI is not under any obligation to respond to a request or disclose the reasons for declining a request.
2.2.7. Confidentiality or request: The applicant may request confidential treatment of the request for a period not exceeding ninety days from the date of the response of the department. In such cases, the department may either accept the request or reject the same.
2.3. The IG Scheme 2003 came into effect from June 24, 2003. The scheme has benefitted various market participants by bringing about certainty in the interpretation of securities laws. Considerable time has elapsed since the introduction of the IG Scheme 2003 and given the experience of SEBI while processing informal guidance applications, the provisions of the IG Scheme 2003 need to be reviewed and updated in order to keep up with the evolving market needs.
2.4. The IG Scheme 2024 proposes to revise the existing process on the following accounts:
(i) Regulated entities such as stock exchanges, clearing corporations, depositories and trustees and managers of pooled investment vehicles registered with the Board may be included in the list of eligible applicants under the IG Scheme 2024;
(ii) The fees and the processing fees chargeable under the IG Scheme 2024 may be increased from ₹25,000 and ₹5,000 to ₹75,000 and ₹15,000, respectively;
(iii) The obsolete provisions under the existing IG Scheme 2003 be suitably revised;
(iv) A nodal co-ordination cell may be created with a dedicated e-mail address for receiving applications through online mode and monitor the processing and the disposal of applications; and
(v) The applicant be provided up to 15 days to respond to the clarifications sought
by SEBI, failing which the application may be rejected by the department.
2.5. These proposals are discussed in further detail in the below paragraphs.
Proposal to expand the eligibility criteria
2.6. Only a limited category of persons is eligible to make a request for guidance under the extant IG Scheme 2003. The market infrastructure institutions like stock exchanges, clearing corporations and depositories, and persons associated with the securities markets such as managers of pooled investment vehicles like Alternate Investment Fund, Real Estate Investment Trust, Infrastructure Investment Trust and Collective Investment Scheme may be considered for inclusion in the list of eligible person.
2.7. In view of the above, it is proposed that stock exchanges, clearing corporations, depositories and managers of a pooled investment vehicle registered with the Board may also seek guidance under the IG Scheme 2024.
Proposal to rationalise the fees
2.8. Presently, a fee of ₹25,000/- (plus GST) is charged from an applicant at the time of making an application under the IG Scheme 2003. However, in case of rejection of an informal guidance application, a processing fee of ₹5000/-. is deducted and the remaining gee is refunded to the applicant.
2.9. In the absence of revision in fees for almost two decades, the fee and the processing fee may be revised from ₹25,000/- to ₹75,000/- (plus GST) and ₹5000/-to ₹15000/- (plus GST), respectively, under the revised IG Scheme 2024 in line with inflation during this period.
Proposal to update obsolete provisions
2.10. The extant IG Scheme 2003 contains references to few provisions which have become obsolete over a period of time. For instance, the Securities and Exchange Board of India (Central Listing Authority) Regulations, 2003 was repealed with effect from January 2, 2007. However, the IG Scheme 2003 still contains a reference to the “Central Listing Authority”. Similarly, the IG Scheme 2003 refers to the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 which has also been repealed by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Accordingly, it is proposed that the IG Scheme 2024 be suitably updated.
Proposal to create a nodal co-ordination cell
2.11. Under the IG Scheme 2003, an applicant has to approach the concerned department of SEBI for seeking informal guidance. In some cases, the applicant may not be aware about the department which deals with the subject matter of the informal guidance.
2.12. Further, there are multiple operational departments in SEBI which deal with informal guidance applications and there is no nodal office within SEBI which monitors the processing of such applications. Hence, designating a nodal coordination cell would provide a single window to the market participants to approach SEBI for seeking informal guidance under the IG Scheme which may further the ease of doing business.
2.13. In view of the above, it is proposed that the IG Scheme 2024 may provide for a nodal co-ordination cell with a centralized e-mail address which shall receive applications only through online mode and monitor the processing of the disposal of application. Further, it may also be proposed that the applicant may be required to seek informal guidance in a standard form as per the format stipulated in the IG Scheme 2024.
Proposal to mandate electronic mail as a mode of communication and the applicant be provided a timeline of 15 days to respond to the clarifications
2.14. Currently, the IG Scheme 2003 provides that SEBI may dispose of the request as early as possible, and in any case not later than 60 days after the receipt of the request and enables the department to give a hearing or conduct an interview with the applicant, if any clarifications are required for providing informal guidance. The departments usually write a physical letter to the concerned entity for seeking such clarifications. Further, it is observed that in many cases, the applicants do not provide the desired clarifications to the department within a reasonable timeline.
2.15. The usage of physical letters to seek clarifications and the delayed responses by the applicant tends to increase the processing time. With a significant change in access to technology over the past two decades, the use of electronic mail as a mode of communication with the applicant may be an efficient option.
2.16. In view of the above, it is proposed to that the IG Scheme 2024 may:
(i) provide applicant time period up to 15 days to respond to the clarifications requested by SEBI, failing which the application may be rejected by the department. The time period taken up to 15 days may be excluded from the overall timeline of 60 days to respond to an application; and
(ii) mandate the departments to use electronic e-mail as a mode of communication for seeking clarifications from the applicant.
Public Consultation
2.17. A consultation paper proposing the IG Scheme 2024 was uploaded on the SEBI Website for the comments of the public. Almost all the stakeholders who have provided their comments, agree with the proposal. The detailed comments received from the public are placed at Annexure-A.
2.18. The key comments in disagreement with the proposals are discussed below:
| No. | Stakeholders’ Comments | SEBI Comments |
| (i) | Market associations such as the Online Bond Platform Provider Association, Stock Brokers Association, Real Estate Investment Trusts Association, Association of Mutual Funds of India etc. may be included in the ambit of the IG Scheme 2024.
This will allow for market bodies to seek queries and set guidelines uniformly for all their members, bringing consistency in market practices. |
The IG Scheme 2024 is for the enabling regulated entities to seek the guidance of SEBI on interpretation of the provisions of securities laws to determine whether their actions/proposed actions are in compliance with the regulatory provisions. Market associations are not regulated entities of SEBI and SEBI has also not specified any compliance requirements for such associations. Hence, this suggestion may not be accepted. |
| (ii) | The scope of the IG Scheme 2024 may be expanded to enable ‘any person’ to seek guidance from SEBI in order to promote consistency and accessibility.
In absence of the same, a prospective acquirer may seek a no-action letter for not undertaking a public offer under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 but a public shareholder seeking to tender her shares may not seek an interpretive letter in respect of a prospective acquirer’s duty to undertake a public offer. |
If ‘any person’ is allowed to approach the Board without any locus or confusion regarding compliance, it would unnecessarily burden the capacities of SEBI. The resources of the Board need to be utilised in an efficient manner and focused only on serious applications requiring an understanding of the manner in which the provisions of the laws are interpreted by SEBI. Thus, only those applicants may be permitted to seek guidance that are regulated entities of SEBI and SEBI has specified elaborate compliances for the entities to comply with. With respect to a shareholder seeking to tender her shares in respect of a prospective acquirer’s duty, there are adequate safeguards available to minority shareholders under the Companies Act, 2013 and to individual shareholders under the SEBI Complaints Redressal System, under which such complaints are processed by SEBI in a time-bound manner. |
| (iii) | The IG Scheme 2024 confines the scope of no-action letters to a “proposed transaction” while permitting exemptive letters in respect of “a proposed transaction in securities or a specific factual situation”. Given that enforcement action may also be taken by SEBI in contexts other than transactions (such as communication of unpublished price-sensitive information), the scope of no- action letters may also be expanded to include specific factual situations. | All scenarios other than those related to proposed transactions and exemptive letters may be covered under the interpretative letter. Accordingly, no changes in this regard may be proposed to the IG Scheme 2024. |
| (i) | Other intermediaries especially Online Bond Platform Provider (“OBP Providers”) should also be specifically included as eligible participants for seeking informal guidance. Also, regulated entities like brokers and other SEBI registered intermediaries must obtain the benefit to utilise the informal guidance scheme. The main guidance is often required by intermediaries who want SEBI’s interpretation regarding their day to day business. | All intermediaries registered with SEBI under Section 12 of the Securities and Exchange Board of India, 1992 including stock brokers are eligible to seek guidance under the IG Scheme 2024.
Further, as per Section 51A of Securities and Exchange Board of India (Issue and Listing of Non- Convertible Securities) Regulations, 2021, OBP Providers are required to be registered with SEBI as stock brokers. Considering that stock brokers are covered under the IG Scheme 2024, OBP Providers may also seek informal guidance. Thus, no further changes in this regard are required. |
| (v) | Increasing the fees and processing fees chargeable under the IG Scheme 2024 from ₹25,000 to ₹75000 and ₹5000 to ₹15000, respectively, places an additional burden on the stakeholders.
As a no action letter provides a recommendation on whether to take or refrain from a specific action and interpretive letters provisions and regulations applicable to the stakeholders’ This will allow the stakeholders to choose between a no action letter or interpretive letter based on their specific requirements and budget. |
No action letters and interpretive letters, both require substantial level of analysis and research to be conducted by the departments into the facts provided and the relevant provisions of the securities laws.Thus, it may not be suitable to conclude that one is a more elaborative and laborious job than the other. In view of the same, the suggestion to charge different amount of fees depending on the nature of the guidance may not be accepted. |
| (ii) | The proposal for revision fee may not be considered. | The fee under the IG Scheme 2024 has not been revised in over two decades. Given the inflation during the said time and the amount of resources utilised by SEBI in responding to an application for informal guidance under the IG Scheme 2024, a revision in fee may be justified. Hence, the suggestion may not be accepted. |
| (vii) | The IG Scheme 2024 provides that the applicant may be provided up to 15 days to respond to the clarifications sought by SEBI, failing which the application may be rejected by the department.
Given that certain requests for clarifications may require the applicant to investigate into |
In light of the rationale provided by the applicant, this suggestion may be accepted to the extent that if the applicant seeks additional time, she may be provided with an additional 15 days to submit her response. No further extension of timelines may be permitted. |
| (i) | The IG Scheme 2024 states that informal guidance issued by a particular department of SEBI constitutes the view of that department and is not binding on SEBI, although SEBI may act in accordance with such guidance.
Further, the guidance would not be a conclusive decision or determination of any question of law or fact by SEBI. Companies use the informal guidance mechanism to seek clarification from SEBI on interpretation of various provisions of SEBI Regulations/Circulars. Applicants are required to give complete facts of the case, the regulatory issues involved and the queries to SEBI, for seeking informal guidance. As SEBI officials give informal guidance after thoroughly assessing the facts and circumstances of a particular case and understanding the legal |
Guidance provided by SEBI to SEBI regulated intermediaries in respect of the actions/proposed actions is indicative in nature given with the intention to explain how the regulator may interpret a given provision of law in certain circumstances. If the guidance is made binding on SEBI, regulated entities may use it as a tool to manipulate proceedings which may be initiated or are pending and to cause unnecessary delays therein. In case there is no violation, in any case, no proceedings will be initiated against the relevant applicant.In view of the above, this suggestion may not be accepted. |
| (ix) | The IG Scheme 2024 states that the Board is not required to provide reasons for rejecting an application.
It is not known that the informal guidance published by SEBI on its website is complete or not. Also, it is practically difficult for the applicant to check whether a no- action or interpretive letter has already been issued by SEBI. Each application should be examined and responded to, instead of being rejected. Feedback on why an application was declined can provide valuable insights to applicants helping them to better align their future submissions with regulatory requirements. This provision should be reconsidered. |
The list of grounds on which the Board may reject the application for informal guidance is mentioned in the IG Scheme 2024 to inform the applicants of the manner in which guidance may be sought.
Further, all of guidance provided by SEBI under the IG Scheme 2024 will be uploaded on the SEBI Website, in line with the practice followed for the guidance provided under the IG Scheme 2003 except in case the applicant requests redaction of certain facts due to commercial secrecy or privacy. Accordingly, SEBI may be permitted to reject applications on the basis of the grounds mentioned in the IG Scheme 2024. Further, as per the grounds mentioned in the IG Scheme 2024, an application for guidance may be liable for rejection if investigation, In view of the above, no changes may be proposed to the IG Scheme in this regard. |
| (x) | The IG Scheme 2024 requires that the letter seeking informal guidance from SEBI would be made publicly available no later than 90 days from the issuance of a response. However, such letters often contain information about the applicant that they may reasonably not wish to make public due to privacy or commercial secrecy.
For instance, a financial technology firm may wish to seek guidance on the permissibility |
This suggestion may be accepted provided that the applicant specifically indicates the facts that are private/commercially sensitive.
Accordingly, upon the request of the applicant and satisfaction of SEBI that such facts are private or commercially secret, those facts may be redacted at the time uploading of the informal guidance on the SEBI Website. |
| (xi) | The IG Scheme 2024 provides that SEBI shall not be liable for nany loss or damage that then applicant or any other person may suffer on account of the application not being answered or being belatedly answered or the Board taking a different view from that taken in a letter already issued under this scheme. SEBI should be liable if the applicant has acted on the basis of guidance received by SEBI. In such cases, the applicant subsequently should not suffer from any loss or damage. | SEBI cannot be held liable for the losses suffered by any person as the informal guidance is an indicative letter and is neither binding on the applicant nor on SEBI. Hence, this suggestion may not be accepted. |
2.19. To further the objectives of SEBI as mandated under Section 11 of the Securities and Exchange Board of India Act, 1992, the Board is requested to:
(i) approve the draft of the IG Scheme 2024 enclosed at Annexure – B; and
(ii) authorise the Chairperson to carry out suitable amendments to the IG Scheme 2024 and to take any other consequential or incidental steps for implementation of the decisions.
Encl.:
1. Annexure-A (22 pages)
Annexure-B (6 pages)
ANNEXURE-A
This has been excised for reasons of confidentiality.
ANNEXURE-B
Securities and Exchange Board of India (Informal Guidance) Scheme, 2024
The Scheme shall be published after following the due process
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