I have a piece in today’s Economic Times trying to read the tea leaves on the regulatory path ahead for SEBI with the new Chairman taking charge. The full piece is as follows:
Winds of change at SEBI: Tuhin Kanta Pandey charts a smarter, softer regulatory path
Synopsis
Sebi, under Tuhin Kanta Pandey, is initiating a regulatory overhaul to ease compliance burdens and enhance market relevance. Key changes include raising the disclosure threshold for FPIs and adjusting AIF investment rules to boost flexibility.
At its first board meeting under the stewardship of newly appointed Chairperson Mr. Tuhin Kanta Pandey, the Securities and Exchange Board of India (SEBI) signaled that it isn’t just dusting off the rulebook — it’s rewriting key chapters with a reformist hand. Held on March 24, 2025, the meeting delivered a flurry of regulatory refinements aimed at boosting market transparency, governance, and investor participation — all while testing the waters with that ever-elusive goal: less red tape, more green signals.
Transparency Begins at Home: SEBI’s Own Code of Conduct in the Works
In perhaps the most symbolic decision of the day, SEBI announced the constitution of a High-Level Committee to review conflict-of-interest provisions, disclosure norms, and ethical guidelines for its own board members. Previously, senior officials like Whole Time Members and the Chairperson were exempt from the very code of conduct that SEBI imposes on every other employee. With this decision, SEBI is finally declaring that it too must “eat its own cooking.” Specially, given the past year’s history, this was an important step to bolster confidence in the integrity of the regulator.
FPIs Get Breathing Room (But Not a Free Pass)
SEBI’s first act is raising the disclosure threshold of ultimate beneficial owner for Foreign Portfolio Investors (FPIs) from ₹25,000 crore to ₹50,000 crore in equity assets under management. This change acknowledges the near-doubling of cash market trading volumes since 2023 — a nod to India's increasingly vibrant equity landscape.
In practical terms, fewer FPIs will now have to peel back the layers of their ownership structures to reveal the ultimate natural persons behind the money. SEBI’s message is clear: “We’ll trust you a little more — but don’t push it.” Still, the rule continues to cast a long shadow over some funds, several of which have been compelled to shut shop in the name of transparency. The solution? Keep the rule, but exercise exemptive powers based on demonstrable facts and a reasoned order. There should also be a de minimis rule – or removal of last human being disclosure for smaller investors. In these markets it would be a tragedy to allow clean FPIs to leave India because of rules they are not able to comply with.
AIF: Regulatory Reality Meets Market Mechanics
When SEBI mandated that Category II Alternative Investment Funds (AIFs) invest at least 50% of their corpus in unlisted securities, nobody predicted a paradox: a shrinking supply of unlisted debt due to new listing requirements and less debt securities for AIFs to invest in.
To restore balance, SEBI has declared that listed debt securities rated ‘A’ or below will be treated as de facto unlisted for compliance purposes. A regulatory Rubik’s Cube solved with a twist — pragmatic, if a bit quirky. This move injects flexibility into AIF portfolios and at the same time deepens the bond market which is very thin below the investment grade. But broader deregulation of the AIF space may still be overdue — regulation fatigue is real, and many fund managers are feeling it.
Investment Advisors: Relief, But Not a Renaissance
Investment Advisors (IAs) and Research Analysts (RAs) can now breathe a little easier — SEBI has extended the advance fee collection period from two quarters to one full year (subject to client consent). For RAs, this is a change from the earlier one-quarter cap.
However, the broader reality remains grim. With compliance costs sky-high and regulations tighter than a bull market squeeze, the number of registered IAs has dropped from over a thousand to just 932 — in a country of 1.4 billion. While the fee reform is welcome, what India’s advisory industry really needs is regulatory decluttering. If SEBI wants to tame finfluencers and tipsters peddling wild promises on YouTube, it should empower the pros rather than bury them in costly paperwork.
Merchant Bankers: A Timely Reprieve from Regulatory Overreach
In a rare regulatory rollback, SEBI deferred its earlier decision requiring Merchant Bankers, Debenture Trustees, and Custodians to segregate activities across separate legal entities. The aim — to reduce conflicts of interest — was noble, but the execution would’ve been a logistical nightmare. The pause is wise. India’s merchant banking framework has operated effectively since 1992 without such compartmentalization. Regulatory changes must be rooted in evidence, not theoretical fears of “shadow banking” ghosts.
Final Word: Deregulation with Direction
Taken together, these decisions mark a shift in tone and tempo for SEBI under Mr. Pandey. The focus appears to be moving from hyper-regulation to smart regulation — from being a strict school principal to a mentor who trusts, but verifies. If SEBI can balance investor protection with market-friendly reforms — and curb the regulatory overreach that sometimes stifles innovation — it may finally achieve what every regulator dreams of: being respected, feared, and occasionally applauded.
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