It is Tuhin Kanta Pandey’s first day as chairman of the Securities & Exchange Board of India (SEBI) as I write this column and he is already facing a storm. His predecessor, Madhabi Puri Buch, and three whole-time members (WTMs) are making headlines over alleged corruption related to the listing of an unnamed company that is not traded since 2017 after several regulatory actions.
A sessions court in Mumbai has ordered the filing of a first information report (FIR) against four officials without details of their exact involvement and the curious omission of the fourth WTM. Details of the case may emerge over time, or it may even fade into judicial obscurity if it is not thrown out. Regardless of what happens, Mr Pandey is getting an immediate taste of the high-stakes world he has entered-- far removed from the insulated corridors of North Block-- where ministers get the credit and the brickbats, leaving bureaucrats to operate in relative anonymity.
Mr Pandey has begun his tenure under difficult circumstances. SEBI’s credibility has taken a severe hit; staff morale is low; and India’s most significant bull run in decades—buoyed by a five-year rally post-COVID—is unravelling rapidly, amid global uncertainty. Since January 2025 alone, foreign institutional investors (FIIs) have withdrawn over Rs1 lakh crore from the Indian market. Investor anxiety is palpable: nearly 80% of India’s 100mn (million) direct stock investors have never experienced a bear market or a major correction. Meanwhile, millions entrusting their savings to mutual funds via the ‘Mutual Funds Sahi Hai’ campaign are bracing for volatility, in the absence of serious economic or policy prescriptions to offer some respite.
Those who know Mr Pandey describe him as a man of integrity and discretion, adept at navigating complex situations without controversy. These qualities will be put to the test, as he seeks to restore order and confidence at SEBI. But expectations from the new chief have to be seen in the context of the situation he has inherited. So, let’s start by giving this some context.
Legacy Issues
The leadership change at SEBI has happened just as we are getting ready to celebrate another international women’s day. There is a sense of serious disappointment that another high-profile woman corporate leader, who appeared to have shattered a glass ceiling, ended up replacing it with toughened glass after a controversial exit. Ms Buch’s well-planned entry into SEBI and her elevation as the first woman and private sector person to head the organisation was backed by the right credentials—in terms of qualifications and experience. She knew how systems were manipulated and ‘where the bodies were buried’—as she claimed. The timing of her term was an added bonus. She took charge in the middle of a historic bull run that had led to huge expansion of the Indian capital market.
And yet, she blew it all by not following the same standards of transparency, disclosure and presumption that SEBI, under her leadership, demanded from all market participants, intermediaries and institutions. Worse, the regulator’s own code of conduct, applicable only to board members and conveniently unchanged for 16 years, was feeble and inadequate. While SEBI imposed ever-stricter compliance burdens on companies, investors and intermediaries, it strangely failed to uphold the same standards internally.
Ms Buch, who had the best possible opportunity to leave a legacy, has left the regulator in turmoil; so, instead of evaluating her hits and misses, it seems more relevant to focus on what needs urgent reform.
The Task Ahead
The consensus view is that Mr Pandey will restore calm and stability after a period of extreme turbulence, address employee issues and re-establish decorum at internal and external meetings, ending the high-drama or dialogue-baazi that marked Ms Buch’s tenure.
Based on conversations with securities lawyers and our own knowledge of SEBI over the decades, here are a few things that need urgent action.
1.Strengthening SEBI’s Governance Framework
SEBI’s 2008 code of conduct—applicable only to board members—must be replaced with a comprehensive, legally binding framework that extends across the organisation. This should cover part-time board members, lateral entrants and bureaucrats, most of whom have significant financial interests, hold stocks and earn rental income, in addition to their government salary or pension. The new code must mandate full disclosure, transparency and a documented recusal process that is approved and notified in the official gazette. It should also establish clear protocols for handling allegations against top officials, ensuring due process instead of ad hoc damage control that embarrassed the regulator during the Buch controversy. (Read: SEBI Code of Ethics: Set It Right before Getting a New Chairperson). It would be naïve to think that appointing a bureaucrat as a regulator fixes the problem automatically in the absence of clear rules.
2.Reining in Regulatory Overreach
Under Ms Buch and her predecessor Ajay Tyagi, SEBI issued an overwhelming number of consultation papers and regulatory directives. According to one estimate, it issued 200 consultation papers during Ms Buch’s tenure alone. Despite this flurry of activity, SEBI appeared to drag its feet in critical areas like regulating retail trading algorithms and financial influencers and trainers, until the industry demanded regulation. Recall that Ms Buch first came under the spotlight due to SEBI’s reluctance to investigate the runaway rise in Adani Group company stocks.
A pause on new circulars for at least three months would allow for a period of introspection and strategic recalibration.
3. Build on Succession & Transmission Reform
One of SEBI’s commendable achievements has been to streamline the process of transmission and succession for investors, in sharp contrast to the callousness of other financial regulators. The master circular of May 2022 simplified documentation and curbed harassment by intermediaries. The recent introduction of a centralised mechanism to report investor deaths is a game-changer that should be urgently adopted by other regulators, including those overseeing insurance and provident funds. This is one area where SEBI had a leadership role that can be expanded with focussed implementation in order to help investors and restore public confidence (Read: SEBI Launches Centralised Mechanism To Report Death of an Investor, Transmission of Account to Nominees).
4. Reforming Investigation and Enforcement Processes
SEBI must prioritise investigations to ensure that resources are directed at issues with the maximum public impact. It should work towards improving the quality of its enforcement orders, establishing internal legal precedents and reducing procedural lapses that have often led to a rap or reversal by the appellate tribunal or high court. Additionally, SEBI must reconsider its practice of appealing every adverse order against it, particularly in cases it has lost due to long delayed investigations. This only prolongs regulatory uncertainty and undermines market confidence. It also ends up making the settlement process look like a pay-and-get-away scheme, available to a select few.
5. Ensuring Independence in Investigations
There are persistent concerns about external interference in SEBI’s investigative processes. Several securities lawyers highlight inconsistencies in interim orders and allege that enforcement decisions are sometimes influenced by external actors. Establishing an independent oversight mechanism would help restore trust and credibility.
Mr Pandey’s appointment marks a critical juncture for SEBI. While restoring internal stability and addressing employee concerns will be immediate priorities, his broader challenge lies in re-establishing the regulator’s credibility. The financial markets are entering a turbulent phase and investor confidence hinges on SEBI’s ability to function as an independent, effective, and transparent regulator. If Mr Pandey can lay the foundation for lasting structural reforms, his tenure will be remembered— not for the crisis he inherited, but for the integrity and stability he restored.
Comments
adityag
2 weeks ago
I doubt it will ever happen.
I'm afraid that SEBI is infected with a virus that no chairman can get rid off. The mindset has to change and so does the toxic corporate culture of babudom and group-think. They are out to think that everyone in the market is rogue and every apple in the basket is rotten. This whole nonsense of over-regulation just to "protect" consumers is nonsensical and has already destroyed the fiduciary profession.
I remember the glowing praises heaped on Buch because she hailed from the private sector, only to butcher SEBI's credibility even more. It's integrity is worse than CB Bhave (and no chairman has made it better, it just got successively worse). Who would have thought?
I will paraphrase Humphrey Bogart famous line from Maltese Falcon: SEBI's integrity is only the stuff that dreams are made of (and a distant wet dream).
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I'm afraid that SEBI is infected with a virus that no chairman can get rid off. The mindset has to change and so does the toxic corporate culture of babudom and group-think. They are out to think that everyone in the market is rogue and every apple in the basket is rotten. This whole nonsense of over-regulation just to "protect" consumers is nonsensical and has already destroyed the fiduciary profession.
I remember the glowing praises heaped on Buch because she hailed from the private sector, only to butcher SEBI's credibility even more. It's integrity is worse than CB Bhave (and no chairman has made it better, it just got successively worse). Who would have thought?
I will paraphrase Humphrey Bogart famous line from Maltese Falcon: SEBI's integrity is only the stuff that dreams are made of (and a distant wet dream).