Disclosures and regulations: New Sebi chairman makes a promising start

The new Securities and Exchange Board of India (Sebi) chairman, Tuhin Kanta Pandey, made some encouraging remarks in his first public appearance after taking office last week. Emphasising transparency in the market, Mr Pandey noted it extended to the regulator as well. The regulator, he noted, needed to be transparent on various measures, including conflict of interest in the board. Interestingly, this bit was not in the speech uploaded on the regulator’s website. However, irrespective of whether the remark was part of the prepared text, the views are now in the public domain and should be welcomed by all stakeholders. Sebi must follow this norm as quickly as possible. 

The remarks on disclosures must be seen in the context of the term of Mr Pandey’s predecessor, Madhabi Puri Buch. A US-based short-seller Hindenburg Research, which has since shut down, had accused Ms Buch of a conflict of interest in relation to an ongoing investigation of the Adani group, against which the firm had previously made several allegations. In response, both Ms Buch and the regulator had issued statements. Sebi has then said it had a robust mechanism for disclosures. Given the nature of the allegations, it was suggested, including by this newspaper, that Sebi adopt better norms. An August 2024 editorial, for instance, argued: “To strengthen the disclosure norms for key persons, and to quell any speculation in the future, the regulator should consider making the financial interests of such persons public.” In modern financial markets, where funds — including foreign — can move in and out very quickly, all relevant disclosures must be in place for regulated entities and key  persons in the regulatory body. Such discourses will boost trust in the system.

  Aside from the disclosure issue, Mr Pandey made some other important points worth highlighting. The regulator will be looking for optimum regulation. If some statutes have become redundant and are not serving any purpose, Sebi will be open to reviewing them. This is a positive statement and is in sync with the government’s overall thinking. Prime Minister Narendra Modi recently spoke about the idea of a Deregulation Commission to address redundant laws and regulations. Sebi can do a lot internally, which will make things easier for regulated entities. To its credit, the securities-market regulator has been working on adapting regulations to the evolving market and economic conditions. Such changes, for instance, have allowed new-age technology companies to raise capital from the Indian equity market. Continued improvement in regulations will make the Indian market an attractive place to raise capital and list. This financial year till January, firms have raised a record ₹4 trillion in equity capital, which is double what was raised in the full year 2023-24. Over the years, Sebi has helped increase the penetration of mutual funds, which has helped deepen Indian capital markets.

  The Sebi chairman further noted the regulator was conscious about creating a conducive atmosphere to attract foreign capital and was willing to engage with stakeholders. This is again a healthy sign. If India has to grow in a sustainable manner at a higher rate, it is important that capital markets function smoothly and are in a position to channel savings into investment with minimum friction. Although Sebi has been working in this regard, it is time to streamline processes further to enhance prospects for both Indian capital markets and the economy.