Sebi takes a fresh regulatory stance under Tuhin Kanta Pandey's leadership

Pivots towards transparency and ease of doing business

With a new leadership at the helm, the Securities and Exchange Board of India (Sebi) is shifting from a stance in favour of more deregulatory approach alongside strengthened governance, as evident from the key decisions during its latest board meeting.

 

New Sebi chief Tuhin Kanta Pandey has underscored account for the “costs” of regulatory changes, signalling a departure from the regulator’s earlier fast-paced approach.

 

“If an alternative approach can ease business without compromising on risk, we will explore it. Regulatory changes must be nuanced and clear,” the career bureaucrat-turned-regulator said on Monday while emphasising a mindful approach to avoid unnecessary burdens on the market ecosystem.

 

Sebi’s relaxed stance was showcased on Monday. The securities watchdog shelved a proposal to oversee the appointment of key managerial personnel (KMPs) in market infrastructure institutions (MIIs) like stock exchanges and clearing corporations. It also deferred the implementation of stricter changes to regulations governing investment bankers and custodians, citing risk of unintended complexities and unnecessary costs.

 

Additionally, Sebi reversed a prior decision from its December meeting that limited advance fee collection periods for research analysts (RAs) and investment advisers (IAs) to three and six months, respectively, relaxing it to one year. “It’s better to take time and refine regulations before issuing them,” Pandey noted.

 

This shift has drawn praise from experts.

 

“I am pleased to see the Sebi board focusing on deregulation and strengthening governance,” wrote MS Sahoo, a former whole-time member, Sebi on social media platform.

 

Legal and industry voices have gone further, calling it a marked U-turn from the regulator’s previous approach.

 

"Between dinner-table jabs that Sebi rules from an ivory tower and the regulator’s own wariness that every profit is suspect, lies the path to balanced oversight. It’s encouraging that Sebi’s first board meeting under the new chairman prioritised trust-building — both within the institution and in the markets. His focus on clarity, stability, and engagement signals a refreshing shift toward faith over fear, a U-turn from recent regulatory approach,” said Sumit Agrawal, partner, Regstreet Law Advisors.

 

The board meeting also brought relaxations for Category II alternative investment funds (AIFs), broadening their investible horizon in the debt segment. To be sure, this and a few other announcements made on Monday were proposed months ago.

 

“The new rule treats riskier listed debt (below A rating) as unlisted for investment purposes — a smart move. I hope this paves the way for lighter regulation in the AIF space, which has shifted from a light-touch framework to hyper-regulation,” said Sandeep Parekh of Finsec Law Advisors.

 

Parekh also welcomed Sebi’s decision to scrap norms requiring merchant bankers to divest non-listed and other work to subsidiaries, which, he argued, would have disrupted operations for “unknown benefits”.

 

Foreign portfolio investors (FPIs) received relief too, though experts suggest this is an area ripe for further reconsideration.

 

“Debt investment guidelines, granular reporting for global funds with minimal Indian exposure, and offshore derivative instruments (ODIs) norms need a relook,” said Divaspati Singh, partner at Khaitan & Co. He highlighted that offshore credit funds, potential key players in the debt market, face restrictive rules on short-term versus long-term bond ratios, hindering their ability to hold assets to maturity.

 

Ahead of the board meeting, Sebi had already eased “skin in the game” rules for mutual fund employees by introducing investment slabs — a response to industry concerns about attracting talent under the earlier framework. 

FROM RIGOUR TO DEREGULATION: SEBI’S NEW PLAYBOOK

 

* Emphasis on ‘cost’ of regulatory changes

 

* Finding new alternative ways to mitigate risks

 

* Focus on effective and optimum regulations

 

* Deferment in proposed amendments to tighten norms on merchant bankers, custodians on segregating certain businesses

 

* Reversing Sebi’s earlier mandate on shorter time period for collecting advance fee from research analysts, investment advisors

 

* Doing away with Sebi approvals for KMP appointments at MIIs