BOI Merchant Bankers Limited (Applicant), a wholly owned subsidiary of Bank of India, had requested SEBI for an informal guidance, regarding conduct of business as a security trustee. The Applicant wanted to initiate the business of security trustee and share trustee, in addition to its present business as a category-I merchant banker. Seeking SEBI’s permission to conduct such business, the Applicant raised a query in relation to the applicable laws under which the Applicant was required to be registered for initiating the new business. After asking for further clarification regarding the meaning and scope of work of a security trustee or a share trustee, SEBI issued its guidance on August 19, 2016. SEBI quoted the definition of ‘debenture trustee’ and ‘debenture’, as given under the SEBI (Debenture Trustee) Regulations, 1993, Companies Act, 1956 and Companies Act, 2013, and held that the Applicant’s query was general in nature and not interpretative, and did not respond to the Applicant’s queries.

The Informal Guidance Scheme indicates that if a query is of a general nature, without proper facts, SEBI may decide to not respond to it. However, in
the present case, the Applicant’s query provided for a specific situation where the Applicant sought to render a particular service and had supplied details related to the functions it proposed to perform. An informal guidance is not a conclusive decision or an order of SEBI; rather it is an interpretation constituting SEBI’s views on a particular set of facts and situations. However, an answer to the query raised by the Applicant would not have been possible without an interpretation of the term ‘debenture¬†trustee’, which, if done, could have set a general precedent, defeating the purpose of an informal guidance.