Tuhin Kanta Pandey took over as the Chairman of Securities and Exchange Board of India (SEBI) in March and has lost no time in setting the tone for his tenure. He hit the ground running with his first board meet, making it clear that ease of doing business was going to be a big priority for the regulator. In a chat with businessline, Pandey said that streamlining regulations and stepping up surveillance is part of its ongoing agenda.
He also spoke about the need for better framing of orders and how recourse to settlement provides a deterrence.
What are the key areas that you are looking at and the priorities that you have for SEBI?
Within the mandate we have from Parliament, I would say that we are trying to better engage with stakeholders with the purpose, which is optimising regulations, trying to see wherever the risks are higher and where there is a potential for risk, we try to address it in a forward-looking way. Wherever we have the possibility of relaxation in terms of micromanagement, which are not really contributing much to risk mitigation in the current context, those we can have a re-look.
We are also trying to look at regulation in a more dynamic way, exploring alternative ways of doing things and choose an alternative, which is possibly less disruptive and less costly to the ecosystem. We are also trying to understand the ecosystem in a more intense way. SEBI has been doing consultations and papers are issued, comments are also invited, but we would like to just give it more thought, listen more, have more granular data, maybe more data analysis and build up that capacity on a system-wide basis. Of course, there will be instances where we will be required to act in terms of our mandate in a very swift manner, and we will do that.
So, it is situational. When we are doing development of the system, we have to take a proper, considered decision after weighing the pros and cons. In certain situations, which are emergent, we have to act immediately to stem that.
There are so many regulations, and they need to be streamlined. Are you going to take a comprehensive look at every regulation and what is the timeline that you think it is going to happen?
I think eventually, but we will have to bite in pieces and so we will progressively do that.
Some of the things we can take up more comprehensively, but in many cases, we would have some pain-points which can be identified and which can be removed. The early pickings are areas where there is no risk but an additional burden on the industry. Those can be removed. In some ways, yes, we have to look at the larger picture and completely rewrite something.
We have three mandates — development, regulation, investment protection — and they are all interrelated. Once you set about doing things, you should be achieving something, on a progressive basis. We have started the process of reviewing.
By when could we start seeing some easing and proposals in line with this?
Some of it you will see in June itself, in our next board meeting. And then, we will have the next target for the next board meeting; so, we will move from board to board and see what all we can do. If we find that there are some other things in the process, if we find that there are also loopholes, which we need to plug then we will work on that. The specifics, you will come to know when we put it out.
Pros and cons are important and when we get proposals, I tell them to keep in mind that institutional development is important for the growth of the capital market, which takes into account a balanced view. It cannot be one-sided. To those who are expecting simplification, I say that you should take public interest into account.
That is why I never said ‘deregulation’, because an optimal regulation is the way to go.
We should change, but there should not be too much of a flip-flop, that we hurriedly did something and then suddenly we find that this was not to be done and again we have to tighten. However, if the circumstances change drastically, then it is a different matter. So, overall, when we do this exercise, we have to do it carefully in terms of balancing the risks.
Market intermediaries are happy about the ease of doing business, but does that mean tightening of rules will take a backseat?
No. Risk has to be mitigated, so if there is a perceived risk then the regulation will not be loosened. In many cases, there are procedural issues which are not risk-related. There could be lots of these things which may not be really contributing to any risk mitigation. It may simply be an over-cautious approach, where you can over-prescribe things and contextually do not take it away.
Will the pace of regulations also come down?
When it comes to regulating more, the pace will definitely slow down. But if our system is prepared to do simplification very fast, we should not stop that.
Despite the existence of so many regulations, we still see a lot of things happening in the market, especially on the SME board, like the latest one on Gensol. So, is there a case for the exchanges being a little more proactive and careful in what they do in terms of SME listings? Are there loopholes there?
I think so. We are watchful. We had to tighten, and we did so but we are still watchful, and we will do more if it is necessary, because that is what I think we should keep doing, especially if there is any egregious behaviour — there will be one or two cases that will always happen, no matter what. But if there is any build-up in the system, and checks and balances are not adequate, then we will step in, in a manner in which we feel that it is most conducive, but we will stem that risk if it arises.
This is a classic case of what you mentioned about having to develop the market. The intent to allow the SME board was to develop the market, but at the same time, it is not getting protected.
Development of the market is not a carte blanche for people to dupe. So, I am not casting aspersion on anything because I have to go by data. We have to go into the data, and that is why I want to increase those capabilities. We keep looking at data or do surveillance on what is happening in different segments. So, while the people go about doing their business, we also get a sense of what is happening and where the risks are emanating. And that leads us to a rationale for what we need to do as the next step.
And again, when we take the next step, what is the best way to go forward? Do we ban things? Do we take over? Do we mandate? The Institute of Chartered Accountants of India had come to see me last Friday. I have told them that as a professional watchdog, I want you to do a proper analysis on corporate frauds. There is a lot which can be done at a systemic level by looking at emerging areas of fraud.
One of the criticisms against SEBI was in its low conviction rate and that it may be a bit ‘soft’ in taking action. What is your take on this?
In 2024-25, out of the orders that SAT (Securities Appellate Tribunal) had, 92 per cent went in SEBI’s favour and I think in the same year 80 per cent of the orders in the Supreme Court upheld SEBI’s actions. I think there has been improvement and you have to also grant, we cannot expect everything to go in our favour because there is a justice system, and appeals are also there.
We have to upgrade the way we write orders, the way we bring evidence, the way we put that evidence into order. So, you would notice more of that, and we will be doing a lot of capacity building on adjudication on the legal side. Many times, you have to put it in the right way and also get the process right because the Courts look at the processes and the way natural justice is given. So if you have a better way to do that, if you concentrate more on that, you may find that more orders will be upheld. So, when we say that we are taking action and we are writing orders, then obviously our effort should be to write good orders and fix it and get the culprits.
There is an option in the securities market to settle cases. We had very celebrated instances where settlements have happened like Axis Mutual Fund front-running case. The problem is that there is little transparency on what happened and the actions that were taken. Should we have such settlement issues at all? From an investor point of view or observers like us, it is forgotten, it is settled and it is done. What are your thoughts on that?
Settlement is a part of our regulation. You can argue whether it should be settled or not. There are some cases that cannot be settled. However, it has been the practice in many jurisdictions to impose hard financial penalties. In many cases, if you start disgorgement process, you can go after that person, and he will go on litigating and plead you to death for many years and keep enjoying his ill-gotten gains.
Now, you may think that he may eventually go to jail and there is a certain path to this. It is also very important to take all of the money as quickly as possible, maybe with some penalties, at least take that money out which is there.
This is also a deterrence. Also the fact that it is settled, even if the detailed order does not come in, the people do get a sense that everything was not right. It also hits the reputation.So the settlement has a financial impact and is a deterrent effect. You should be able to fully disgorge and that is the way the regulations have been written. That is the way they are designed, because otherwise we have to give an opportunity to run through the whole process of legal challenge. Settlement also means that the perpetrator doesn’t also go for a legal challenge. But overall the deterrence factor should be there and should be felt.
But is the deterrence big enough? There are cases which have disrupted the market, there are investors involved, there has been a massive erosion of wealth, because of whatever they did. Are the settlement provisions commensurate with the size of the fraud? There should be some relation between the violation and the fine.
Normally, settlement will be commensurate with the kind of damage which has happened, damages to be quantified that has to be accepted, there has to be reasonableness also about the settlement.
These are the issues that needs to be debated on our part and if you say the settlement amount is not enough, you can actually get into the settlement regulation, it prescribes how the settlement is done. The penalty also ranges from ₹5 lakh to ₹25 crore and then there are disgorgement and others, they have to be on actual basis.
What are you doing to enhance surveillance? How much of technology related to AI is SEBI deploying now?
In surveillance, we have plenty of tools. I believe that we have notched up our surveillance, quite a lot, through our technical tools. We also have a very smart workforce, increasingly we will make them smarter and also add a lot on the tech side. We will do a lot on this and also use AI… We are doing it already, but there is room for further upgradation to be done. And I think that will be a very important deterrent. Then we will be able to catch up and prove to the Courts in a much better manner. We have our own tools, we have procured many tools, and we will continue to upgrade.
