Background:

The Securities and Exchange Board of India (SEBI) recently issued an advisory directed at registered intermediaries and regulated entities (Advisory). This Advisory aims to clarify the protocols for communication with SEBI officials, particularly concerning the interpretation of operational measures and policy issues related to the securities markets.

Nature of Communications:

SEBI frequently receives various forms of communication from registered intermediaries and regulated entities. These communications often seek clarifications on specific operational measures or policy interpretations. However, SEBI has emphasized that any such communication with SEBI officials, whether it be summaries of discussions, meeting minutes, or personal interpretations should not be construed as official approvals or clarifications unless explicitly stated by SEBI itself. This distinction is crucial to prevent misunderstandings regarding the regulatory framework.

Explicit Written Communication Required:

In light of the above, SEBI, through its Advisory, recommends that all registered intermediaries and regulated entities ensure that any actions requiring approval or clarification are undertaken only after receiving explicit written communication from SEBI. This requirement underscores the importance of documented guidance in maintaining regulatory compliance and avoiding potential pitfalls in operational practices.

Utilizing the SEBI Informal Guidance Scheme

For those seeking interpretive guidance or no-action letters, SEBI recommends utilizing the Securities and Exchange Board of India (Informal Guidance) Scheme, 2003 (Informal Guidance Scheme). The Informal Guidance Scheme provides a mechanism for registered intermediaries, listed companies, and mutual funds to seek informal guidance on regulatory matters. Eligible entities can request two types of letters under the Informal Guidance Scheme: no-action letters, which indicate whether SEBI would recommend any action for a proposed transaction, and interpretive letters, which clarify specific legal provisions in the context of a proposed transaction. To initiate a request, entities must submit a detailed letter and a fee of ₹25,000, outlining all relevant facts and applicable legal provisions. SEBI aims to respond within 60 days but may conduct hearings if necessary.

MHCO Comment:

The Advisory issued by SEBI reinforces the necessity for clear and documented communication between market participants and regulatory authorities. By adhering to this advisory and utilizing the Informal Guidance Scheme, when necessary, registered intermediaries and regulated entities can navigate the regulatory landscape more effectively while ensuring compliance with SEBI's requirements. However, it is important to note that the letters issued through SEBI’s Informal Guidance Scheme are not legally binding and SEBI can also take a contrary view in future. Therefore, entities following the guidance provided by SEBI may still find themselves in hot waters with SEBI, which in our view defeats the purpose of providing paid guidance.
 

This update was released on 14 Nov 2024.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
Advocates, Solicitors and Notaries
T: +91 22 40565252
Mumbai Office: Surya Mahal, 2nd Floor, 5, Burjorji Bharucha Marg, Fort, Mumbai-400 023, India
Delhi Office: Block C-9, Lower Ground Floor, Jangpura Extension, New Delhi - 110 014, India
www.mhcolaw.com

"Noted lawyer in the Real Estate practitioner from India" - Chambers & Partners

Please consider the environment before printing this email

The information contained in this communication is intended solely for the use of the individual or entity to whom it is addressed and others authorized to receive it. This communication may contain confidential or legally privileged information. If you are not the intended recipient, any disclosure, copying, distribution or action taken relying on the contents is prohibited and may be unlawful. If you have received this communication in error, or if you or your employer does not consent to email messages of this kind, please notify the sender immediately by responding to this email and then delete it from your system. No liability is accepted for any harm that may be caused to your systems or data by this message.