Informal Guidance Scheme of SEBI: Understanding the Concept and Analyzing the Guidance Provided by SEBI

Abstract

In its effort to have better regulation and orderly development of the securities market, SEBI issued a scheme for Informal Guidance called Securities and Exchange Board of India (Informal Guidance) Scheme 2003. The said scheme was of contemporary importance as SEBI receives a number of requests from various market participants for advance guidance on the interpretation of the provisions of SEBI Act, Rules, Regulations, and Circulars. It was a formal scheme launched by SEBI in the name of providing informal guidance. As the name suggests the guidance provided is 'informal' and is not to be construed as a conclusive decision of any question of law or fact by SEBI. Moreover, such letter giving informal guidance cannot even be construed as an order of the Board under section 15T of the SEBI Act and as such will not be appealable. SEBI's informal guidance scheme though not a super hit gave an average performance. The immediate year after its launch, i.e., 2004, there were 63 no action/interpretive letters issued by SEBI under this scheme. In the subsequent years, on an average of 12-14 no action/interpretive letters were given by SEBI under the Scheme. One of the reasons may be SEBI is coming up with more clearer rules, regulations and circulars or people have got answers of all their questions.

Keywords: SEBI, Informal Guidance, No-Action Letters, Interpretive Letters

JEL Classification: L22, L19