When Tuhin Kanta Pandey took over at the Securities and Exchange Board of India (Sebi), the regulator was grappling with internal unease and heightened external scrutiny. A year on, he speaks to Anjana Theresa Antony and Joydeep Ghosh about restoring trust, tightening oversight, expanding Sebi’s footprint across India, and preparing markets for the next wave of technological disruption. Excerpts:
When you joined, there was internal discontent among certain cadres and external criticism as well. What worried you the most?
I believed the issues had to be addressed head-on. I was asked this question on the day I joined, and I said we would anchor ourselves on four principles — trust, which was critical at that time; transparency; teamwork, which also needed strengthening; and technology.
We also emphasised optimum regulation — neither over-regulation nor under-regulation. From day one, efforts were made to embed these principles within the organisation.
Over the past year, reforms have been undertaken across five broad areas: ease of doing business, investor protection and empowerment, strengthening the regulatory framework, fostering market development, and measures to stabilise the equity derivatives market. Enforcement actions complemented these initiatives.
We are continuously upgrading technology. Apart from our standing committees, we have set up one focused exclusively on the forward-looking technological needs of the market over the next 5–10 years. Experts and market infrastructure institutions are examining global trends and identifying where India should position itself.
There are separate committees on cybersecurity and technical advisory matters. A committee on fintech and regulatory technology, chaired by R S Sharma, former UIDAI chief, is also in place.
We have additionally created a committee on regulatory impact assessment — a relatively new area. Under NISM, we are establishing a Centre for Regulatory Studies. All this has been done in what has been a challenging year for the markets.
You had said you were not worried about foreign outflows. Given global uncertainties, what challenges do you face as a regulator?
I see FPI inflows and outflows as part of a system where investors optimise post-tax returns. FPIs are nimble and move depending on currency movements, sectoral opportunities and relative valuations.
Between April and January, FPIs sold equities worth about $9.5 billion in the secondary market, but were net buyers of $7.2 billion in the primary market. As of end-January, FPI equity assets under custody stood at $775 billion, up from $285 billion at the end of FY16. Including debt and other instruments, total AUC was $853 billion.
Over the past year, I have held around 77 meetings with FPIs — in small and large groups — and gathered feedback. They remain positive about India. Over the past 6–10 years, dollar returns from Indian markets have averaged around 9%.
FPIs had flagged several operational issues. We have addressed concerns relating to registration timelines, digitisation, digital certificates, streamlining processes, the India market access portal, the block deal framework, the closing auction mechanism and the netting mechanism, which is under consultation and will be implemented. Many perceived impediments to future growth have been removed.
As a regulator, we must constantly improve market infrastructure, credibility, technology, enforcement and surveillance systems.
Companies often make vague disclosures — citing “unforeseen circumstances”, for instance — which provide little clarity to investors. Is Sebi looking at clearer guidelines?
There is scope to bring greater clarity to the LODR framework. At times it becomes too all-encompassing and difficult to comply with. Reducing ambiguity and strengthening enforcement is the way forward.
The challenge lies in drafting regulations that are clear, focused and pragmatic. Regulatory provisions can be interpreted differently — this is not unique to Sebi. Cleaning up regulations is not always popular because it requires additional work. But, like spring cleaning before Diwali, you cannot keep pushing issues under the carpet.
We take action where material disclosures are not made. Disclosures must be accurate, and false disclosures will be dealt with firmly.
At the same time, compliance should not become an end in itself. A company may be “compliance perfect” but fail to innovate or invest in technology. Investors want companies to grow, not just comply. The right approach is appropriate compliance — not excessive compliance.
The high-level committee on conflict of interest was a significant announcement. Are tweaks expected?
The matter will be deliberated at the next board meeting.
Several changes have been made in the derivatives segment to curb retail participation. Some argue that raising entry barriers may be better than frequent tweaks. Your view?
There was wide consultation before the changes were introduced. If data indicates that further intervention is required, we will examine the available pathways through a consultative process. This issue cannot remain in perpetual debate.
Whenever this topic arises, Sebi receives hundreds of emails — some asking why we are intervening, others accusing us of harming the market.
We will continue to analyse the data and adopt a calibrated and thoughtful approach.
What are the key focus areas going forward?
We are opening eight new offices to begin with. Cyber fraud is rising sharply, and not everything can be handled online.
Regional outreach is equally important. We must engage in local languages when operating in states — not just English and Hindi. A great deal of market activity is emerging from smaller cities. These centres should be encouraged, and Sebi’s presence can help deepen participation.
Physical presence will enable better coordination with stakeholders. Over time, we aim to scale up these offices so they can undertake substantive regulatory work.
We have also implemented an e-office system. Sebi has undergone a major internal transformation — there are no longer any physical files.