I have a podcast with Hansi Mehrotra (a Zerodha initiative on investor education), where we discuss the differences in approach of US and India with respect to investor protection and market infrastructure.
How does India’s securities regulatory framework compare with the United States? The answer lies in their differing philosophies: proactive prevention vs. reactive correction. In the U.S., markets have historically been allowed to innovate freely, with regulation catching up only after systemic issues surface—subprime mortgages and crypto are prime examples. India, by contrast, cannot afford such shocks. Its framework is designed for pre-emption, prioritising investor protection and systemic stability from the outset. At the core stands SEBI (est. 1988/1992), empowered by statute to regulate markets, protect investors, and enforce compliance. Importantly, its toolkit includes both administrative penalties and criminal proceedings.
Supporting legislation:
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SCRA, 1956 – governs stock exchange integrity.
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Depositories Act, 1996 – enabled dematerialisation, ushering in transparency and efficiency.
In the U.S., investor recourse often takes the form of class-action lawsuits. India does not rely on this mechanism. Instead, SEBI directly steps into that role, acting as the primary enforcer of investor rights. Oversight is not unchecked. The Securities Appellate Tribunal provides an independent forum to review SEBI’s orders, ensuring due process and accountability. The result: India’s markets are governed by a preventive, statute-driven framework, while the U.S. leans on market-led innovation with corrective interventions. Each reflects its own economic context.
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