The Securities and Exchange Board of India (SEBI) is taking significant steps toward modernizing its regulatory framework under the leadership of Chairman Tuhin Kanta Pandey. In a bid to enhance market integrity and adapt to the evolving financial landscape, Pandey plans to establish an internal committee focused on reviewing existing regulations. This initiative mirrors the Income Tax Department’s approach in formulating the Direct Tax Code, 2025, aiming to eliminate outdated regulations.
Revamping Regulations: A Strategic Mission
Pandey describes this endeavor as a crucial organizational mission that he intends to expedite over the next three months. While the review will primarily be conducted internally, there will be consultations with sector experts to ensure a robust and comprehensive evaluation. “Optimal regulation is essential,” Pandey emphasized, recognizing the necessity of conducting an impact analysis of current rules. He stated, “This is a relatively new area, and we need to determine who can effectively perform the regulatory impact assessment.”
Focus on Market Integrity and Fair Practices
Having previously served as finance secretary and revenue secretary, Pandey’s experience is significant, especially as he took the helm of SEBI shortly after presenting the simplified Direct Tax Code to Parliament on February 13. In his first interview as SEBI’s chief, he highlighted the importance of maintaining market integrity and promoting fair practices. He noted that while regulations crafted with stakeholder input tend to have longevity, some may only be relevant for a short period, addressing immediate challenges in a fast-paced market environment.
Addressing Conflicts of Interest
To further enhance regulatory clarity, Pandey is forming a high-powered committee tasked with developing conflict-of-interest guidelines. He dismissed concerns that private sector professionals might struggle to lead regulatory bodies, asserting that a solid monitoring framework is crucial. “If someone has recused themselves, there should be a ready-made database,” he pointed out. The names of the committee members will be announced soon.
Protecting Small Investors in Derivative Trading
In light of the alarming statistic that 90% of people lose money in derivative trading, SEBI is actively analyzing feedback from the market. The regulator plans to release a discussion paper aimed at safeguarding small investors engaged in options trading, emphasizing the need for protective measures.
Expanding the Investor Base
To diversify the investor demographic, Pandey mentioned several proposals currently being discussed with the Reserve Bank of India (RBI) and the government. These discussions include potentially doubling the 10% cap on direct investments by Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) while also considering allowing foreign individual investors direct access to Indian equities. Presently, foreign individuals must navigate the Foreign Portfolio Investor (FPI) route due to existing restrictions.
Prioritizing Simplification Over Problem Solving
Pandey highlighted a shift in focus from merely fixing regulatory issues to simplifying regulations, noting that they come with inherent costs. “If an egregious case arises, we must assess whether the issue stems from implementation or a systemic flaw,” he explained. He cautioned against rushing to solutions without thoroughly diagnosing the problem, emphasizing the importance of effective regulation.
Commitment to Central KYC
Regarding the proposed central KYC (Know Your Customer) initiative for the financial sector, Pandey expressed SEBI’s enthusiasm and commitment to collaborating with the RBI on its implementation.
As SEBI embarks on this transformative journey, the regulatory landscape in India may soon witness significant enhancements aimed at fostering a safer and more inclusive investment environment.
