Enhanced transparency, optimum regulation, balanced reforms: promises Sebi’s new chief

India’s new securities markets regulator, Tuhin Kanta Pandey, pledged to address the concerns of foreign investors, pursue ‘optimum regulation’, and enhance transparency—only to leave market experts wanting more.

Pandey, who took over from Madhabi Puri Buch as the chairperson of the Securities and Exchange Board of India on 1 March, said a transparent and accountable regulatory framework would foster confidence and clarity in the market. 

“Going ahead, we will endeavour to bring more transparency in the system, including board disclosures,” the Sebi chief said at the Moneycontrol-CNBC Global Wealth Summit on Friday.

Some market experts sought more clarity on Pandey’s pledges, particularly on transparency.

“Whether it means transparency of past actions is unclear,” said Abhiraj Arora, a former Sebi official and currently a partner at law firm Saraf & Partners. “There also needs to be a transparency of Sebi board meetings, as is common in the western world, where they are livecast.”

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Sumit Agrawal, founder of Regstreet Law Advisors, highlighted existing information gaps such as delayed publication of Sebi’s agenda. “While Sebi publishes press releases summarizing board meeting outcomes, the underlying discussions remain largely undisclosed,” said Agrawal, also a former Sebi official.

He also highlighted that Sebi doesn’t disclose instances of dissent or voting patterns within its board, and called for greater transparency in handling conflict of interest among Sebi board members. 

“Past concerns regarding conflicts involving a former chairperson highlight the need for clearer public disclosure of deliberations in such cases,” Agrawal said. “Sebi does have a code on conflict of interests for board members, but how it is applied in real scenarios remains opaque. A periodic review and strengthening of this code into a regulation would improve governance at Sebi board meetings.”

Also read | Sebi’s Madhabi Puri Buch and the fuss over her ICICI payouts

Addressing foreign investors

Pandey in his speech addressed concerns related to operational difficulties faced by foreign portfolio investors (FPIs) and alternative investment funds (AIFs), signaling a willingness to rationalize regulations. 

“We will be happy to engage with FPI and AIF industry participants to address their difficulties and further rationalize regulations to promote ease of operation,” he said.

Arora of Saraf & Partners called for regulatory adjustments or rationalization of frameworks for FPIs and AIFs. 

“Our clients are suffering because of the regulatory actions taken in the name of transparency, which is forcing some of them to leave India,” said Arora. “Regulators never face any consequence for making the law so tight that regulated entities cannot do legitimate business. However, it hurts business and ease of doing business.”

Sandeep Parekh, managing partner at Finsec Law Advisors, was optimistic that Pandey’s comments could indicate changes to amendments that have increased compliance burdens on FPIs and AIFs. 

“Given the recent significant sell-off by FIIs (foreign institutional investors) and the slump in the Indian stock market, easing these regulations could help stabilize the market and attract foreign capital,” he said.

India’s stock markets have been battered in recent months as foreign investors remain significantly bearish amid rising international trade tensions triggered by US President Donald Trump’s tariff war, including a proposal to impose reciprocal tariffs on imports to the US from India.

Also read | Nifty’s relief rally could may not last long if foreign investors remain bearish

‘Optimum regulation’

Pandey also signaled a review of redundant statutes. “We will certainly not be looking for maximum regulation but for optimum regulation. If some statutes are redundant and outdated over the years and not serving any purpose, we are happy to review the same,” he said.

Market experts are hoping for a significant de-regulation in securities law, not just rationalization. 

Saraf & Partners’ Arora pointed to the complexity and length of existing anti-fraud and insider trading laws, and advocated for a “wholesale re-look at the law”. 

Parekh of Finsec Law Advisors suggested that Sebi prioritize updating regulations from the 1990s related to mutual funds, merchant bankers and stock brokers to reflect current technology and market dynamics.

Regstreet Law Advisors’ Agrawal called for a data-driven approach to identifying redundant provisions, advocating for a systematic review of Sebi’s 44 regulations and thousands of circulars. 

“A practical approach would be to map each provision based on its actual application in administrative and enforcement actions. Provisions that have remained unused for an extended period should be considered for removal,” he said. 

Agarwal also called out the pattern of regulatory amendments by Sebi in response to adverse judgments by the Securities Appallete Tribunal or the Supreme Court. “This reactive approach should be reconsidered to ensure regulatory stability and predictability,” he said.

‘No need for Big Bang reforms’

Sebi chief Pandey, meanwhile, expressed a desire to engage with stakeholders to encourage voluntary compliance. 

“Laws and regulations are better enforced through voluntary compliance. I am looking forward to engage with all stakeholders to discuss what more measures need to be taken to encourage voluntary compliance,” he said. 

“All reforms need not be Big Bang. Many a times small reforms cumulatively are more effective. Going forward, Sebi will use a right mix of both to achieve the objectives,” he added.

Securities lawyer Chirag M. Shah echoed Pandey’s views on reforms, saying large-scale regulatory changes may not be feasible in a sophisticated market like India’s. 

“Reforms should be gradual, meaningful, and proactive, addressing emerging challenges,” he said. “A piecemeal, consultative approach is preferable over drastic measures.”