The Medium Has Changed. The Rules Should Too.

SEBI's June 2026 consultation paper proposes a single Common Advertisement Code to replace the fragmented, entity-specific codes that currently govern how brokers, advisers, analysts, portfolio managers and mutual funds describe what they sell. It is a genuine simplification and should be adopted. But harmonisation is the starting point, not the object: universal 24-hour filing and standing prior approval for celebrity endorsements keep it a permission system, only a tidier one. Parker Karia and I in today's Financial Express on what the paper gets right and where it stops short.

Financial regulation usually follows innovation in products. SEBI’s consultation paper of 23 June 2026 addresses innovation in selling. The proposed Common Advertisement Code says nothing about what regulated entities may offer investors. It governs only how they may describe it, across every medium that now reaches investors.

Advertisements today reach investors through social media, podcasts, webinars and trading applications at a speed and scale the first advertisement codes never contemplated. Those codes remain fragmented and entity specific, differing more in procedure than in principle. A stock broker answers to exchange circulars, investment advisers and research analysts to their master circulars, a mutual fund to the Fifth Schedule of its regulations and a portfolio manager to an annexure of another. SEBI now proposes to replace all of them with a single chapter in the SEBI (Intermediaries) Regulations, 2008, covering brokers, depository participants, investment advisers, research analysts, portfolio managers, online bond platform providers and mutual funds.

The proposal is both timely and necessary. The market has moved from distinct intermediaries to integrated platforms that offer several regulated products through one interface. Separate codes for each entity produced overlapping obligations, inconsistent interpretation and avoidable cost, although every code pursued the same objective: advertisements that are fair, balanced and not misleading. The Code is also technology neutral, treating print, broadcast and digital communication alike. Investor harm turns on what a communication says, not on the medium that carries it. It borrows, too, the Central Consumer Protection Authority’s 2023 guidelines on dark patterns, so that false urgency and subscription traps are treated as advertising failures in their own right.

The most significant change proposed is the shift from prior approval to post-issuance reporting. Several existing codes require an intermediary to obtain clearance from an exchange or supervisory body before an advertisement is issued, a model built for a time when advertising was infrequent and confined to traditional media. Entities now respond to market developments on the same day, sometimes within the hour. Requiring clearance for each such communication delays legitimate activity without measurably improving investor protection. SEBI’s own explanation is candid: the prior approval model was designed for traditional advertising where volumes were low and lead times were long.

The proposal then stops short. Every advertisement must still be reported to the supervisory body, promptly and no later than 24 hours from issuance. For an entity that issues hundreds of digital communications a month, that does not reduce the compliance burden. It relocates it from before publication to after. The filing is universal, so supervisory attention remains spread evenly across communications that carry no risk at all. A more proportionate design would rely on internal approval by the entity, prescribed governance standards for how that approval is exercised, and periodic or risk-based review by the supervisory body. Where an advertisement is misleading, it should be taken down through a reasoned order that the entity can contest, not forestalled by a filing obligation imposed on everyone in advance.

The paper also recognises that not every communication issued by a regulated entity is an advertisement. Investor education, factual corporate communication and regulatory disclosure serve a purpose different from promotion and should not be treated alike. The carve-out, however, turns on branding that is “minimal and incidental” and content carrying “no promotional intent”. Both are matters of degree, and degree is exactly what a compliance officer cannot certify. A workable test would be structural rather than aesthetic: educational content should fall outside the Code so long as it identifies the entity, makes no performance claim, names no product and contains no call to action. An entity can apply that test without asking anyone’s permission.

The treatment of celebrity endorsement is the clearest instance of the older approach surviving. SEBI would permit celebrities at the entity or brand level rather than for a named product, which is a liberalisation, but it retains prior approval for every such advertisement. The definition of celebrity then extends across eight categories, taking in anyone with more than five lakh followers on a single social media handle, a television anchor who has completed ten episodes, and a virtual character with lifelike human traits. The rule therefore attaches to who is speaking rather than to what is said. A line drawn at five lakh followers also invites the obvious answer, which is to engage four influencers with four lakh followers each. The requirement is then satisfied and the investor is in precisely the same position. If prior approval is retained, it should at least carry a defined timeline, failing which it should be deemed granted.

Two structural gaps remain. Because the Code is anchored in the Intermediaries Regulations, it reaches only registered intermediaries. Mutual fund distributors, who register with the industry association and not with SEBI, fall outside it, although they remain among the primary points of contact between a product and a retail investor. A common code that omits a large category of sellers preserves the fragmentation it was drafted to remove. Second, the paper sensibly permits a hyperlink to full disclosures where an SMS, a pop-up or a push notification cannot carry them. The same constraint applies to short-form video and audio, where a spoken disclaimer is either unreadable or unheard, and the concession should extend there as well.

The Code is a real simplification and should be adopted. But harmonisation is the starting point, not the object. A single rulebook administered through universal filing and standing approvals is still a permission system, merely a tidier one. SEBI has accepted that the medium no longer determines the harm. It should now accept that the messenger does not either.

Electronic Gold Receipts: A Second Attempt at Building India’s Gold Exchange Ecosystem

I have a piece with Purva Mandale and Sudiksha Moorthi in today's Financial Express on the financialisation of gold receipts: 

Indian households hold more than 25,000 tonnes of gold, roughly three times the official reserves of the United States. Almost none of it trades on a regulated market. For decades, policymakers have tried to bring that idle stock into the formal financial system. The Union Budget 2018-19 announced a Gold Policy meant to develop gold as an asset class and build a regulated exchange for it. The Union Budget 2021-22 then made SEBI its regulator. 

Thereafter, the term ‘Electronic Gold Receipts’ (EGRs) was coined by SEBI, whose board approved the trading framework and the SEBI (Vault Managers) Regulations, 2021 on 28 September 2021. The Central Government then notified EGRs as securities, letting them trade on the exchanges like shares. BSE launched the first EGR segment during Muhurat Trading in October 2022, and NSE followed in May 2026 by dematerialising a 1,000-gram gold bar. Despite these developments, market participation in EGRs has remained relatively limited, particularly when compared with Gold ETFs, whose assets under management exceeded ₹1.7 lakh crore by March 2026.

The framework itself is worth setting out briefly. An EGR is a dematerialised security representing ownership of physical gold stored with a SEBI-registered vault manager. Gold deposited with a vault manager is first assayed to verify compliance with London Bullion Market Association (LBMA) or Indian Good Delivery (IGD) standards. Once verified, an equivalent EGR is credited to the depositor’s demat account. The EGRs can then be traded on stock exchanges on a T+1 settlement basis, and holders may redeem them for physical gold, upon which the EGR is extinguished.

Its defining feature is fungibility. Whichever vault holds the metal, an EGR is meant to trade as one standardised instrument in a nationwide market. It also brings assaying, vaulting, depositories and exchange trading under a single regulatory roof. Thus, while the architecture is coherent and promises transparent price discovery, standardised quality assurance and efficient settlement, the problem lies in the ecosystem surrounding it.

The trouble begins with inadequate market infrastructure. At present, only three vault managers are registered with SEBI, and when NSE launched its platform in May 2026, vaulting and collection centres were operational only in Mumbai and Ahmedabad. Interoperability requires a nationwide network through which both EGRs and physical gold can move. Instead, bullion dealers, refiners and jewellers across the country often find the nearest collection centre hundreds or even thousands of kilometres away. Consequently, trading remains concentrated among a small pool of participants, limiting liquidity and undermining efficient price discovery. This is not a regulatory limitation. SEBI already permits any branch of a registered vault manager meeting prescribed safety standards to function as a collection and withdrawal centre. The framework allows the network to expand; it simply has not yet.

The eligibility criteria for deposits are a more structural problem. Under the existing framework, EGRs may be created only against freshly imported gold, gold sourced from accredited domestic refiners, or gold that has continuously remained within the regulated vaulting ecosystem. Consequently, India’s household gold cannot enter the EGR ecosystem. This significantly narrows the potential supply of exchange-traded gold. The fix is an accredited assaying and refining pathway that turns household gold into standardised bars eligible for EGR issuance.

Taxation is a further obstacle. Redemption of an EGR into physical gold attracts 3 per cent GST on the value withdrawn, even though that same gold will ordinarily have already borne 3 per cent GST at the time of import or purchase. In principle the earlier levy generates an input tax credit that should offset the later one, but in practice that credit may not be readily utilisable because the original depositor and the eventual holder redeeming the EGR for physical delivery are generally unrelated parties. Consequently, the embedded tax remains locked throughout the life of the instrument.

A final weakness is the narrow range of commercial uses open to EGRs. Financial instruments typically derive liquidity not only from trading but also from their integration into broader financial markets. One opportunity lies in the rapidly expanding market for gold-backed lending. The Economic Survey 2025-26 notes that loans against gold jewellery grew 125.3 per cent year-on-year, making them one of the fastest-growing segments of personal credit. Yet lending against jewellery is inherently inefficient because purity is uncertain, lenders apply significant valuation haircuts, and pledged jewellery must remain in their custody, creating storage and insurance costs.

EGRs eliminate each of these inefficiencies. The underlying gold is assayed and standardised before the receipt is issued, remains securely stored within the regulated vaulting ecosystem, and can be pledged electronically through the existing depository infrastructure without any physical movement of gold. Recognition of EGRs as eligible collateral by the Reserve Bank of India for lending by banks and NBFCs is one policy measure that could broaden the commercial applications of the instrument.

India’s experience with EGRs shows that a sound framework alone does not make a market. While the framework provides for standardised custody, assaying and exchange trading of physical gold, market development also depends upon supporting infrastructure. Whether EGRs ultimately unlock India’s vast stock of household gold will depend far less on the framework, which is sound, than on the resolve of regulators and market participants to build the ecosystem around it.

 

Podcast on the plumbing of securities regulations, fraud, insider trading and much more

I recently joined Soulaima Gourani on The Saturday Salon for a wide ranging conversation on securities regulation, insider trading and the invisible plumbing that keeps financial markets running.

We spoke about why the information hierarchy in markets, from corporate management down to the retail investor, can never be fully flattened, and why good regulation focuses on compressing the time lag rather than trying to eliminate the gap altogether. We also discussed why insider trading is so difficult to prove, the circumstantial evidence regulators rely on, and India's transition over the past decade from a tightly controlled economy to a predictable, disclosure based market that has helped keep talent at home and pushed market capitalisation past GDP.

The conversation also touches on my book, Fraud, Manipulation and Insider Trading in the Indian Securities Markets, now in its fifth edition, and on my early years at SEBI.

Watch here 

Podcast on Apple

Compliance cannot override the investor’s interest

I have a piece with Parker Karia and Sudiksha Moorthi in today's Financial Express arguing that the Supreme Court went wrong in its recent ruling against Kotak Mutual fund and that the ruling wrongly elevates a timing rule over the very duty it was meant to serve. A regulatory philosophy that says outcomes are immaterial cannot govern actors whose defining legal duty is to produce good outcomes. This will hurt all mutual fund and other fund managers who will veer towards a box ticking exercise even if it hurts investors. Below if the full piece:

 

 

The Supreme Court’s recent decision in the Kotak mutual fund case has caused unease among not only the mutual fund industry, but across all fund managers, and those who owe a fiduciary duty towards their clients. The term “fiduciary duty” can be vague, and varies with the relationship between the person who owes the duty and the person to whom it is owed, but it invariably involves a duty of good faith, trust and honesty. In the specific context of fund managers, it requires them to act in the best interest, and for the benefit of the investors. 

Kotak MF launched six close-ended schemes, which were to mature during April to May 2019. Out of the Rs. 1,625 crore collected by the schemes, approximately Rs. 266 crore was invested in debentures of two Essel Group companies. This was secured by pledging shares of Zee Limited, to the tune of 1.5 times of the schemes’ exposure. When Zee's price collapsed in early 2019 and lenders across the market began invoking their pledges, the cover fell below the agreed level.

At that point, Kotak MF could either enforce its pledge at once, selling a large block of Zee into a falling market and crystallising a loss of approximately Rs. 376 crore for its unitholders, or extend the debentures and pursue an orderly recovery. The former option would have further lowered Zee’s shares, as well as harmed the other lenders, and the latter option, which Kotak MF chose, resulted in profits to the unitholders. 

By extending the debentures, the schemes were not wound up on their maturity dates in April to May 2019, resulting in a breach of the Mutual Fund Regulations. Instead, the unitholders were paid in part, and the balance was paid out by September 2019, about 4-5 months after the schemes should have been wound up. After completing its inquiries, SEBI penalised Kotak MF, its senior management, as well as the Trustees. The Securities Appellate Tribunal, while removing certain directions, largely upheld SEBI’s action, which was then affirmed by the Supreme Court as well.

The ultimate decision taken by Kotak MF and its officers is aligned with their fiduciary duties.

The SC relies on investors’ awareness of risk in investing in securities while arriving at its conclusions, and the obligations on Kotak MF under the regulatory framework. Surprisingly, the apex court has missed the central point that Kotak MF was required to act in the best interest, and for the benefit of its unitholders. In fact, the mutual fund regulations mandate that investments are to be taken in the interest of unitholders. Any fiduciary asked to choose between those outcomes on behalf of the people whose money it manages would choose what Kotak MF chose. That is their job. 

Per the SC, excusing a profitable breach would incentivise the next one, in a progression from profit to greed and from greed to systemic failure. But this reads conduct backwards, from result to motive. In early 2019 no one knew whether the standstill would hold or collapse. The decision had to be taken under uncertainty, on the information then available, as every investment decision is. A fiduciary who picks the course that appears least harmful to investors, and is later proved right, has not acted out of greed. Prudence is measured before the event, not after it. A court cannot call the outcome immaterial and, in the same breath, read culpability out of it.

The deeper flaw is the assumption that compliance and investor protection always run together. The winding-up rule exists to return unitholders their money on the promised date and to stop a closed scheme carrying open-ended risk. If applied to the letter, Kotak MF would have had to sell Zee’s shares in a collapsing market, resulting in the very harm the framework is intended to avoid. The fund's fiduciary duty pulled the other way. When a timing rule and the duty it serves point in opposite directions, the investor protection argument is far from puerile. The harshness of the judgment sends a message: it tells a fiduciary that the safe course is mechanical compliance even where compliance would hurt the investor. A regulatory philosophy that says outcomes are immaterial cannot govern actors whose defining legal duty is to produce good outcomes.

The mutual fund regulations do not contemplate a situation where a promoter-pledge structure collapses 90 days before maturity, because regulations cannot contemplate everything. When the unforeseen happens, we rely on fiduciaries to exercise judgment. Instead, the SC announced that it could not examine the commercial prudence of the decision, and then penalised the decision anyway. It refused to weigh the economics while punishing an economic choice.

Kotak MF used neither, and provided SEBI with limited information until it was asked, days after the first schemes had matured. That may not be ideal, but in the absence of a baby-sitter rule, is not a legal breach. A pathway similar to what was implemented by Kotak, which SEBI introduced in 2018, called side-pocketing, was not available to Kotak as it was prospective. In economic terms, what Kotak did was nearly the same. What Kotak did was act in a regulatory vacuum, implementing a solution the regulator itself recognised in 2018. Given the above, attaching personal responsibility to senior functionaries of the manager and the trustee is also over the top regulation. Outcomes cannot be immaterial when they would exonerate and decisive when they condemn. The rules exist to protect the investor, not the other way round.

16 years of Finsec Law Advisors

 

A breach of limits is not a fraud - SEBI v. Reliance

In Reliance v. SEBI (29 May) the Supreme Court sets aside a Rs. 447 cr disgorgement order. Reg. 2(1)(c) of the anti-fraud regulation of SEBI is so broad that, read literally, even running would qualify. The Court read it down.

A breach of limits is not a fraud. On 29 May, the Supreme Court set aside a Rs. 447 crore disgorgement against Reliance Industries and drew a line under SEBI's habit of dressing up rule-breaches as manipulation. Three points:

 

• Position limits are a disclosure regime. Breach attracts a penalty, not a fraud finding.

 

• Reg. 2(1)(c) is self-contradictory — one limb dispenses with intention, the other requires inducement. The Court read inducement as controlling.

 

• Concentration gives a trader the ability to manipulate. It is not, by itself, manipulation.

 

Judge Posner made the same point in Sullivan & Long v. Scattered Corp. in half a page. Our Reg. 2(1)(c) has taken twenty years and is still arguing with itself.

 

 My piece in today's Financial Express:

 

The Supreme Court has told the securities regulator something it did not want to hear: that breaking a position limit is not the same as committing a fraud. The reasoning in Reliance Industries v. SEBI, decided on 29 May, matters more than the Rs. 447 crore disgorgement order it set aside.

The dispute goes back to November 2007. Reliance Industries, then holding 75 per cent of Reliance Petroleum, decided to sell five per cent of that stake, some 22.5 crore shares, into a market that analysts thought overpriced. To hedge the risk of a price fall, it took short positions of 9.92 crore shares in the November RPL futures. It did so through twelve agent entities, because the client-level position limit set by SEBI's circular of 2001 would not have allowed a single client to hold a position of that size.

 

SEBI's case was that the twelve entities were a device to corner the futures market, that Reliance held up to 93 per cent of the open interest, and that it depressed the settlement price by selling 1.95 crore shares in the closing minutes of 29 November. All of this, the regulator said, was fraud under the Prohibition of Fraudulent and Unfair Trade Practices Regulations. The Securities Appellate Tribunal agreed, by a majority of two to one.

 

The Court's first move was to separate two ideas that SEBI had run together. A position limit is a risk-containment tool. The 2001 circular did not forbid crossing it; it required a trader who crossed it to disclose the excess, and penalised the failure to disclose. Breaching the limit, even through agents, was therefore a disclosure default that attracted a monetary penalty. It was not, on that fact, a fraud. The Court upheld the penalty and set the fraud finding aside.

 

The second move went to the definition of fraud itself. Regulation 2(1)(c) defines fraud to include any act, omission or concealment, whether deceitful or not, that induces another to deal in securities. The Court noticed what practitioners have long known: the definition is self-contradictory. Its first limb dispenses with intention; its second limb requires inducement, which presupposes intention. Read literally, the Court said, the provision is so wide that almost any act in the market could be called a fraud. The court relied on this author’s book to state that by the current definition of fraud, even running would amount to fraud. Faced with that absurdity, the Court read the two limbs together rather than against each other, treating inducement as the controlling element and the words 'whether deceitful or not' as descriptive of the act rather than dispositive of intent.

 

From that the Court drew a disciplined conclusion. Inducement remains a necessary ingredient of fraud, except where manipulation is itself proved so cogently that inducement can be presumed, as the Court held earlier in Rakhi Trading, where the manipulation was patent on the tape. Where inducement is not shown, the regulator carries a higher burden: it must prove a distinct act of price manipulation, not merely a motive or an opportunity. Concentration of positions gives a trader the ability to manipulate. It is not, by itself, manipulation.

 

Applied to the facts, the case collapsed. The futures positions were a genuine, if imperfect, hedge against a real cash-market exposure, and the law has never required a hedge to be perfect. The closing-minute sales were made into an unexplained price spike, at prices in line with what Reliance had accepted earlier in the month, while other participants sold similar quantities in the same window. On these facts, the Court found, fraud rested on suspicion rather than proof.

 

The significance of the judgment lies in what it does to SEBI's enforcement methodology. For years the regulator has treated the breadth of the fraud definition as a licence to convert regulatory infractions into charges of manipulation, because the latter carry disgorgement and a stigma that a fine does not. The Court has now drawn a line. A breach of an exchange rule is to be punished as a breach of an exchange rule. It becomes fraud only when the regulator proves the ingredients of fraud.

 

The Court's instinct here has good company abroad. In Sullivan & Long, Inc. v. Scattered Corp., 47 F.3d 857 (7th Cir. 1995), the legendary law and economics expert, Judge Posner faced a complaint that a broker had committed manipulation on an awesome scale by short-selling more shares of a company than existed. The conduct looked extreme, and the plaintiffs urged that the scale alone proved the wrong. Posner refused to accept the equation. What Scattered had done, he held, was arbitrage, not manipulation: its sales did not push prices away from underlying value but towards it, puncturing a balloon rather than launching one. He similarly found that breach of an exchange rule, may be a violation of that rule, and doesn’t make it a fraudulent position. 

 

There is a lesson for the rule-makers too. The Court was blunt that Regulation 2(1)(c) is a piece of inelegant drafting, and that an enactment with such consequences for the economy should leave no room for doubt. The criticism is fair. A definition that, on its own terms, could catch the innocent and the guilty alike is not really a definition. It is a discretion dressed as a rule.

 

The fraud definition needs rewriting so that it names what it forbids. Until it does, the regulator will keep winning at first instance and losing on appeal. Better to draft the rule clearly than to keep litigating its meaning. The Seventh Circuit took half a page to say what manipulation is and is not; our Regulation 2(1)(c) has taken twenty years and is still arguing with itself. That is a drafting problem, and drafting problems have drafting solutions.

SEBI’s Fix for a Broken Price Discovery

I have a piece with Manas Dhagat in the Financial Express of the 24th June 2026 which discusses discussing price discovery on exchanges. For long-suspended scrips re-listing on Indian exchanges, the call auction has for years produced opening prices that have little to do with value. A base price stuck at Rs. 10 and a narrow dummy band get genuine bids rejected, no equilibrium forms, and the scrip opens into a wall of upper circuits. SEBI's 21 May 2026 consultation paper proposes to fix this: base price tied to two independent valuations, dummy-band flexing made automatic and simultaneous across exchanges and extended through the random closure window, and at least five unique PAN-based buyers and sellers for a valid equilibrium. In our latest piece in the Financial Express, Manas Dhagat and I argue the reform gets the principle right. A price discovery mechanism should get out of the way while the market decides. Its success will turn on execution: the quality of the valuations and the latency of automated flexing. SEBI is not setting the price. It is finally letting the market do so.

The full piece is as below:

A market price is only as good as the interest that produces it. When regulatory design keeps part of the buying or selling interest out of the auction, the resulting price reflects the design, not the security. SEBI’s consultation paper of May 21, 2026 proposes to fix one such design, the call auction window for IPOs and re-listed scrips, which has for years produced opening prices that have very little to do with value.

When a new IPO lists, or a suspended scrip re-lists, a 60-minute Call Auction Session runs from 9:00 AM to 10:00 AM: 45 minutes for order entry, 10 minutes for matching and confirmation, and a 5-minute buffer before normal trading. The order entry phase closes randomly between the 35th and 45th minute, a design intended to deter manipulation.

During the session, there is formally no price band, and only limit orders are permitted. This requires participants to specify a price, which is intended to allow the market to find a genuine opening price. At the close of the session, unmatched orders in IPO scrips move to the normal trading session at their limit price. For re-listed scrips, if an equilibrium price is discovered, unmatched orders similarly move to normal trading. If no equilibrium is reached, all orders are cancelled and the scrip remains in call auction mode on subsequent trading days until a price is found.

Two constructs shape the session in practice. The first is the base price, the reference anchor. For IPOs it is the issue price. For re-listed scrips revoked within a year, it is the latest closing price on any exchange. For scrips suspended for over a year, it is the lower of the auditor-certified book value or face value, which usually leaves the base price at Rs. 10. 

The second construct is the dummy price band, set by exchanges as a guard against erroneous orders. The dummy band ranges from -50% to +100% for IPO scrips, -85% to +50% for re-listed scrips, and ±90% for SME IPO scrips. Orders outside this band are rejected and cancelled. The band can be flexed by 10% increments when the indicative equilibrium price presses within 10% of either edge. However, no flexing occurs from one minute before the random closure window begins. Further, no flexing is applied to SME IPO scrips at all.

For long-suspended scrips, a low base price and a narrow dummy band produce a predictable failure. With a base price of Rs. 10, the upper band for a re-listed scrip is only Rs. 15. Any investor willing to bid closer to the company’s actual value has the order rejected. No equilibrium emerges. When the scrip then moves to normal trading, the suppressed opening price draws persistent buying pressure and a series of upper circuits.

SEBI, acting on the recommendations of its Secondary Market Advisory Committee, proposes three reforms. On base price, the existing rule for re-listed scrips is replaced with a tiered framework. Where suspension was revoked within six months, the latest closing price on the relevant exchange is used; where revocation was after more than six months, the lower of valuations certified by two independent chartered accountants or valuation agencies is used as the base price. 

In terms of dummy price bands, the existing mechanism is retained but flexing is proposed to be made automatic and simultaneous across exchanges. Further, this is extended to operate through the random closure window. Additionally, a call auction shall be treated as successful only if orders from at least five unique PAN-based buyers and sellers contribute to the equilibrium price. If this threshold is not met, IPO scrips move to normal trading at the issue price, while re-listed scrips remain in call auction on the next trading day.

Dummy bands are a safeguard against erroneous orders, not an indication of value. They should therefore expand dynamically as genuine buying and selling interest emerges. Extending flexing through the random closure window follows from that principle. Since this is the final and most critical phase of price discovery, restricting flexing at that stage may exclude genuine orders and result in an equilibrium price that reflects only a portion of market interest.

The harder question is execution. In a session where minutes matter, real-time PAN validation and the simultaneous communication of flexing across exchanges will decide whether these are safeguards or bottlenecks. The framework will rise or fall on two things: the quality of the independent valuations used to fix the base price, and the latency of the automated flexing mechanism in practice.

The proposed framework gets one thing right. A price discovery mechanism is not meant to tell the market what a security is worth. It is meant to get out of the way while the market decides. For long-suspended scrips, the existing rules did the opposite, and the opening prices showed it. SEBI is not setting the price. It is finally letting the market do so.