Tuhin Kanta Pandey, Chairman of the Securities and Exchange Board of India (Sebi), shares a compelling vision for the regulator’s role in India’s dynamic capital market, emphasising balanced regulation and sustainable market growth. 

You have spoken about building trust between Sebi and market participants and doing away with excessive micromanagement and outdated roles. Could you elaborate on what you meant by that? 

The point is that trust has to be looked at more broadly. One is that the people in general would have trust in the regulator… Sebi, over a period of time, has been a very robust institution, and successive leadership has honed it. We have faced challenges, and we have overcome them; capacity has been built up. In my opinion, it’s one of the best regulators in the world—technologically, institutionally, and also in terms of rules. And in my opinion, also in terms of implementation. But trust is a continual process. So, sometimes if there are some episodes, we have to get honest feedback and then ask, ‘Why is it happening? What more can we do?’ So, to bring a little bit more transparency, for example, [when] conflict of interest issues were raised. So, we looked at it and said, ‘How are we organised in terms of that particular narrative?’ In my opinion, we can do far better. So, why don’t we update the framework? We have the 2008 framework for board members. There are also service regulations for employees. But right now, there is very little public disclosure. So, public disclosure could be important, at least to some extent… And the second thing is, even internally, we need to have a better understanding of conflict of interest because that can also impede the work otherwise. Sebi [has] formed a six-member high-level committee to review and enhance the existing framework for managing conflicts of interest, disclosures, and related matters.  

This is one important thing that we want to say: there was something, so let us take it on board. In my opinion, it’s an opportunity also. And so, let us go at it. Then, another level of trust—you should see the consultative process. We have always had a consultative process in Sebi. That is a very good part of Sebi’s functioning. This is something that has been continuing for some time. Consultation papers are put out in the public domain. Then there are committees, representative of the industry. They deliberate, and now we have also done a regulation on how to draft a regulation. So, in order to draft a regulation, you must go through a certain process. That has also been put into place. So, we are moving in that direction, but we want to go a little further in terms of the nature of those consultations and possibly the time required. If we are able to have more fruitful deliberations, then perhaps we should give a little more time for deliberation so that we’re not hurried all the time. And also, how much can you do at the same time? Because if you put too many things on the table, there could be a possibility that we would have less time to deliberate on these matters. So, trust-building also needs time to really understand each other’s point of view—on why we are doing something. 

The third is that internally, within Sebi, we also need to move towards what kind of organisation we will become in the next 15-20 years. How do we internally build up teamwork within Sebi so that overall, the output is more consistent, more trustworthy? While different people are doing their jobs, it’s like cogs in a wheel—how does the whole thing come together? That’s the third element. 

The fourth is that we also need to see how we are trying to look at the investors. When we say we are doing investor protection, at a certain stage, we need to really say, in terms of awareness-building, are we doing good enough? Can we do better so that when they come in as investors, they also know the risks adequately? And the ecosystem is also fairly well-regulated in terms of how we are able to deal with certain elements, like fraudsters and others. How are we able to control it? And possibly, I think, more stringent action on some frauds and malpractices, like insider trading, to set an example so that others don’t repeat it—repeat offenders, undesirable trade practices that are fraudulent. Corporate governance should also be consistently maintained. These are things where capacity needs to be enhanced. 

At times, the Securities Appellate Tribunal (SAT) overrules Sebi orders. Is there a need to strengthen the legal and investigative mechanisms? 

Data-wise, I don’t see that as a very big problem. Sebi orders being upheld in SAT is very high, 90% or more. So, it’s not to say that most of them are not being upheld. In any judicial process, I would say it’s a fair judicial process. Which is not to say that we don’t have chances for improvement. Even if I’m winning 90% of cases, I’d still like my orders to be better than what they are. We should consistently try as an organisation to upgrade our capacity, our quality—both quantity and quality need to be upgraded. For that, we will take up a number of institutional measures inside, such as standardisation in many respects, honing techniques. Sebi itself has upgraded quite a lot in terms of bringing in evidence, data, and new techniques that are constantly evolving. We will further support both in terms of IT tools—more sophisticated software to help track—as well as other investigative techniques, including forensics, which will be strengthened. But it also requires continuous legal training, capacity building on the legal side, and adding more resources. If you want to reduce the time taken for completing investigations and adjudication, our aging analysis shows considerable improvement in how much time it takes, where there’s been considerable improvement. But Sebi’s role itself is expanding in terms of the market size being what it is today, and in the next 15, 20 years, it’ll be massive. So, commensurate with that, we have to build up capacity—adding more resources quantity-wise and also quality-wise to maintain high-quality outcomes. 

Is Sebi exploring multidisciplinary data-sharing for investigations, similar to the data-sharing practices among income tax, CBIC, CBDT, and banks, to enhance investigative capacities? 

Yes, such a framework already exists and needs further activation. Shortly after joining, I attended a workshop in Delhi where Sebi presented cases it had successfully resolved to over 10 agencies, including CBDT and ED. These agencies appreciated Sebi’s sophisticated techniques in tackling complex economic issues and financial crimes, which are challenging to address. Inter-agency data exchange offers significant benefits. A data-sharing mechanism is in place through the Financial Intelligence Unit (FIU), enabling smooth data flow. Additionally, stock exchanges regularly share data with Sebi, and this two-way data sharing will continue to strengthen. 

Post-Covid, the influx of new investors into the markets has been significant, broadening Sebi’s responsibility to protect them. Your views? 

You’re correct. The numbers are substantial, with many first-time investors. Sebi must collaborate with partners like exchanges and market intermediaries to launch an accelerated, ambitious awareness campaign. 

Does Sebi need to do more to ensure investors are better educated than they are today?

Investor awareness is a critical responsibility for Sebi, alongside broader financial awareness shared with other regulators. Artificially restricting participation in markets or specific products isn’t feasible. Instead, we must educate investors about various choices and products. Safer options, like mutual funds, offer pooled investments, but some individuals are savvy direct investors. We cannot curtail their freedom to invest, as it’s their right.

What are your thoughts on T+0? Could it encourage more trading and less long-term investing? 

That comparison is not appropriate. You’re comparing apples and oranges. Decreasing the time of settlement is about increasing efficiency and improving the trust of investors because why should an investor’s money be locked up? You’re only trying to increase efficiency and ensure the money [float] doesn’t lie with brokers—it lies with investors. Securities are safe because the clearing corporation directly credits them to your demat account, not through brokers. To that extent, this system is superior in terms of investor protection, money protection, and securities protection. It ties into the whole digital system. Reducing settlement time is about reducing risk, not promoting trading. It’s not a trader-versus-investor thing. On the trader-versus-investor issue, you have taxation like STT. If you’re trading frequently, there’s taxation every time, unlike long-term capital gains after a year. The taxation system already incentivises long-term investment. But can we stop people from trading? They build liquidity in the market. If everyone just sits as investors and nobody trades, exits will be difficult. While T+1 is a very good development and gives a fairly right balance, but because of time zones and the ability of FPIs to move money, T+0 may have its own challenges. So, it’s optional.

What is your view on further lowering the total expense ratio of mutual funds? Is there a conflict between mutual funds’ push for deeper penetration, which increases costs, and the returns for unit holders? 

There are two sides to this issue, and we must strike the right balance. Cost is a key concern but so is expanding reach. Engaging with stakeholders and holding more discussions is essential to devise optimal regulations. Sometimes, a phased roadmap is better than immediate changes.

Many loss-making new-age companies, often far from profitability, are entering the market as prominent, storied firms. Can a separate segment be created for informed investors? 

The relationship between issuers and investors determines this. Issuers value their securities at a certain price, and investors decide whether to invest through a book-building process. Market pricing can be influenced by exuberance or caution, driven by cyclical trends and bilateral dynamics at the time of issue. Regulating this is challenging, as markets have their own rhythms. Instead, we prioritise enhanced disclosures to ensure investors have sufficient information to make informed decisions. Sebi strongly opposes fraud and malpractices that obscure the truth. Transparent facts should be presented, supported by neutral analyses from proxy advisors. In a market as large as India’s, diverse instruments are needed to curb manipulation. Decisions should be fact-based, analytical, and grounded in fundamentals. Investors, in turn, pressure companies to act responsibly, creating a symbiotic process. Sebi’s role is to act as a catalyst for market development and an arbiter ensuring a fair ecosystem. Beyond that, issuers and investors must resolve pricing and participation. Markets inherently involve risk, and investors take risks based on perceptions and disclosures. No one, including Sebi, can predict the future—whether specific companies or technologies will succeed. Our role is to enforce fair rules, acting as the umpire, not a player.

What’s your take on the SME segment? 

We’ve introduced changes to eligibility criteria based on experience and are currently maintaining the status quo until a further review is deemed necessary. SMEs need access to capital, but raising funds at excessively high PE ratios raises concerns. If manipulation or undue exuberance is driven by false information, that’s an issue. However, we cannot dictate how investors perceive a company’s future potential—such optimism drives growth and stifling it would hinder progress. Sebi’s role is to enforce fair rules and curb manipulative practices, like pump-and-dump schemes where stocks are artificially inflated through falsehoods for promoters to exit. We focus on preventing false disclosures, monitoring influences, and enhancing the ecosystem with smarter tools, involving market intermediaries, exchanges, and AI.

How much AI is Sebi using, and in which areas? 

AI is already in use across various functions, and its adoption will grow as the technology becomes more accessible.

Can credible finfluencers be mainstreamed, similar to registered investment advisors (RIAs)?

The business model shouldn’t prioritise short-term gains. By simplifying regulations for RIAs and research analysts, we can support them and curb malpractices. I recently met with their associations to address their challenges. Investors must also value paid advice, as free advice can be misleading. Unregistered advisors promising assured returns, which violates Sebi rules, cannot receive ads or partner with platforms or brokers. Regulations should be straightforward to reduce compliance costs while ensuring accountability.

Is Sebi considering a revamp of its approach to governance, given issuers’ compliance burdens? 

Corporate governance should benefit companies, and those with strong practices should highlight them. As minority shareholders, aided by media, become more aware, they prioritise companies with good governance, gaining an edge by focussing on factors like independent directors, related-party transactions, or account details. As India’s capital market matures, we need entities that differentiate issuers based on governance, not just market reputation. Protecting minority shareholders’ interests will push companies to excel.

Sebi mandated one woman director on boards, but sometimes it seems like token compliance. How can companies be encouraged to promote women meaningfully, adding value rather than symbolism? 

We shouldn’t assume it’s tokenism without evidence. Research is needed to assess the impact of women directors. Some of the best independent directors may be women, but we need data-driven insights, not assumptions. Academic and industry engagement can help evaluate whether the mandate is effective. Gender inclusion starts with initial steps—without them, progress stalls. India has advanced by prioritising gender equality, with women excelling in fields like aviation and maritime. The mandate creates a platform for performance, regardless of gender or background. Research specific to India’s corporate governance experience, not just global models, is essential to guide future steps.

Could you clarify the status of the NSE IPO and the reasons for the delay? 

There’s no bias against the NSE IPO—BSE is already listed, so there’s no reason NSE cannot be. Key issues include governance structure clarity, technology management, and the clearing corporation’s separation, for which we’ve outlined conditions to ensure market integrity and stability. Given NSE’s significance, these factors are critical. Additionally, some litigations, including Supreme Court cases, remain unresolved, and settlements are ongoing. Sebi is engaging with NSE to find a pragmatic solution in the market’s best interest, with no predisposition against the IPO.

What are the two or three key pillars of your immediate vision or priorities? 

My parliamentary mandate guides us: investor protection, market development, and effective regulation. Within this, we aim for optimal regulation—avoiding both overregulation and under-regulation, like well-placed traffic lights.