Believe in neither overregulation nor underregulation: Sebi chief

Tuhin Kanta Pandey outlines Sebi's focus on trust, transparency and data-driven regulation as it reassesses F&O risks and market governance

Securities and Exchange Board of India Chairman Tuhin Kanta Pandey, who has completed his first year at the helm, speaks to Khushboo Tiwari and Samie Modak in an interview in Mumbai about rebuilding trust, reviewing conflict-of-interest safeguards, the evolving approach to F&O regulation, and Sebi’s long-term priorities anchored in what he calls the “four Ts”. Edited excerpts:

 

When you took charge, there was a perception of a credibility cloud over Sebi. How did you approach the role? 

On Day 1 of my joining I was asked about my priorities. I articulated what I call the “four Ts” —  trust, transparency, technology, and teamwork. All of this is anchored in one overarching objective: optimum regulation. That means neither overregulation nor underregulation, but regulation that best serves Sebi’s mandate. Our mandate rests on three pillars — investor protection, market development, and market regulation. These are not watertight compartments; they are interlinked. The real task is to balance them through sensible, proportionate regulation. Whether we have succeeded is for stakeholders and the market to decide. 

Trust was clearly a priority, given the credibility concerns. How did you work towards rebuilding it? 

Trust is intangible, but it ultimately flows from credibility — doing what you say you will do. One key step was addressing the conflict of interest concerns that had been raised. We constituted an independent committee, which submitted its report. The report is in the public domain. We have discussed it at the board level and will deliberate further in board meetings. I would not like to prejudge outcomes, but many recommendations are well-considered. Some aspects require action beyond Sebi, including at the government level. Others are within our control, and we will take reasoned calls — whether to accept, implement, or deliberate further.

 

Does the current framework adequately address conflict-of-interest concerns among senior officials? 

Even earlier, many safeguards existed in practice. For instance, while certain activities may be legally permitted, many board members, including myself, voluntarily refrain from them. That is a de facto standard. What the committee has helped with is bringing greater de jure clarity by suggesting processes around disclosures, recusals, record-keeping, and reporting. One gap we identified was systems. Recusals were happening, but not always in a structured, auditable manner. Given the volume of decisions taken daily, we need proper databases and digital records. Those are among the recommendations we are working on.

 

On the Securities Market Code (SMC), concerns were raised about Sebi’s financial autonomy. How are discussions with the government progressing? 

The SMC has now been placed before Parliament. It is currently being examined by the Parliamentary Standing Committee on Finance. Discussions with the committee are confidential under parliamentary procedure, so I cannot comment on details. Once the committee submits its report and Parliament takes a view, there will be greater clarity.

 

Foreign portfolio investors (FPIs) have pulled out nearly ₹2 trillion over the last year. What is driving this trend? 

From my interactions — over 70 meetings in India and overseas — investor sentiment on India remains broadly positive. However, FPI flows are cyclical, not structural. Investors constantly rebalance portfolios based on relative returns, currency movements, global interest rates, and alternative opportunities. In the last year, the rupee was under pressure, which reduced dollar returns. At the same time, US interest rates offered attractive risk-free yields. These factors influence marginal allocation decisions. If global rates soften, flows can return just as quickly.

 

Does the Supreme Court ruling on tax residency certificates impact India’s attractiveness for FPIs? 

Any such judgment naturally creates some uncertainty. However, how the government communicates and implements it will matter more. At present, I do not sense an aggressive approach to reopening settled cases. Unless there are fresh actions, the impact should be limited.

 

Will Sebi revisit disclosure thresholds for FPIs, particularly the ₹50,000-crore granular disclosure norm? 

We are examining feedback. Some FPIs have highlighted that India forms a very small part of their global portfolio, yet they breach concentration norms due to exposure to just one or two stocks. These are genuine issues, and we are reviewing whether adjustments are needed. No final decision has been taken yet.

 

Has Sebi assessed whether losses in the futures and options (F&O) segment, especially options, have reduced after recent measures? 

First, we should stop using the blanket term “F&O”. There is no systemic issue with futures, and even most options trading is not problematic. The concern is narrowly concentrated in short-tenor weekly options. That distinction is important. We are currently analysing data. If intervention is needed, there are multiple pathways — product design changes, access controls, suitability norms, or disclosures. Any decision will be data-driven and preceded by consultation. We do not want to kill the derivatives market, which plays a vital role in risk management and price discovery.

 

Will Sebi consider further tightening if data shows continued retail losses in weekly options? 

We will go by evidence. Markets cannot be kept in a constant state of uncertainty. If intervention is warranted, it will be calibrated, consultative, and proportionate.

 

There is concern that IPOs are increasingly being used for promoter exits rather than capital formation. Is this a structural issue? 

The data does not support that concern. At its peak in 2020, nearly 87 per cent of IPO proceeds were from offers for sale (OFS). Today, the ratio is closer to historical averages — roughly 55 per cent OFS and 45 per cent fresh issue. Over long periods, this balance has remained broadly stable. There is no structural distortion. Also, capital outflows through OFS should not be viewed negatively in isolation. Promoters can also extract value through dividends. Capital is fungible — it moves in and out depending on opportunity.

 

Sebi has indicated plans to oversee activity in the ‘to-be-listed’ space. What prompted this move? 

We have observed the emergence of unauthorised electronic platforms facilitating trading or quasi-trading activity close to IPOs, particularly in the grey market space. Our legal assessment is that Sebi has jurisdiction over the to-be-listed segment. Unlisted companies fall under the Ministry of Corporate Affairs, but the moment securities are proposed to be listed, there is a regulatory vacuum that needs addressing. The idea is not to impose full-fledged listed-company compliance, but to introduce limited, proportionate oversight. Details, including scope, platforms, and compliance requirements, will be set out through a consultation paper. We have not yet finalised a timeline.

 

What would you count as your biggest achievement in the past year? 

It would not be appropriate for me to single out achievements. My satisfaction lies in seeing Sebi evolve as an institution — stronger, more thoughtful, and more collaborative. There is a noticeable shift away from reflexive regulation towards problem-solving, consultation, and teamwork — not just internally, but with market participants as well.

 

As markets grow faster than bank deposits, does Sebi see its responsibility expanding? 

Absolutely. Capital markets are already custodians of a large and growing share of household wealth — across mutual funds, bonds, AIFs, REITs, and InvITs. Over the next 20 years, markets will expand significantly, with new products, fractionalisation, and technology-driven innovation. This places greater responsibility on us to continuously upgrade regulation, supervision, surveillance, and technology. We already have dedicated working groups looking at the next five- and 10-year technology needs of the regulatory system.

 

Finally, are there any areas where Sebi wants to send a strong cautionary message to the market? 

Enforcement remains critical, particularly around insider trading, front-running, and market manipulation. Alongside enforcement, we are investing heavily in preventive measures — better surveillance, improved systems, and outreach to fiduciaries who handle unpublished price-sensitive information. Strong enforcement, credible deterrence, and prevention together are far more effective than constantly rewriting rules.