Challenges and Priorities for Incoming SEBI Chairman Tuhin Kanta Pandey

New Leadership at SEBI: Balancing Regulation, Market Innovation, and Investor Protection

Tuhin Kanta Pandey, an Odisha cadre IAS officer from the 1987 batch, is set to take over as the 11th chairman of the Securities and Exchange Board of India (SEBI). His appointment comes at a critical time when India’s capital markets regulator is under intense scrutiny. With unfinished regulatory reforms, market volatility, and internal employee concerns, Pandey will need to balance investor protection, regulatory oversight, and innovation while ensuring India’s financial markets remain globally competitive.

His predecessor, Madhabi Puri Buch, introduced significant technology-driven reforms and tighter regulations, sometimes drawing criticism from market participants and SEBI employees. Now, all eyes are on Pandey’s agenda—whether he will continue a strict regulatory approach or adopt a more accommodative stance toward market stakeholders.

Key Priorities for SEBI Under Tuhin Kanta Pandey

1. Mutual Fund Industry: Striking a Balance Between Regulation and Growth

One of the most pressing issues for Pandey will be addressing concerns from the mutual fund industry, which faced tighter regulations under Madhabi Puri Buch’s leadership. Some of the key challenges include:

• Expense Ratio Reforms: SEBI had been working on reducing expense ratios for mutual funds, a move that faced resistance from asset management companies (AMCs). The new chairman will need to find a balance between cost efficiency for investors and profitability for AMCs.
• Thematic Fund Proliferation: Buch was critical of the increasing number of thematic new fund offerings (NFOs), arguing that AMCs were launching them mainly to offer higher commissions to distributors. This remains an unresolved issue, and Pandey will be expected to bring clarity on SEBI’s stance.
• Regulatory Flexibility: The industry is hoping for a more consultative and accommodating approach under the new leadership, ensuring that compliance requirements do not stifle innovation.

2. Addressing Employee Discontent at SEBI

During Madhabi Puri Buch’s tenure, SEBI witnessed unprecedented employee protests, with staff members alleging a “toxic work culture” due to her private sector-driven approach. Employees even escalated complaints to the Finance Ministry, highlighting internal dissatisfaction.

• Buch introduced a mechanism encouraging SEBI staff to engage more with market participants, a move that some employees opposed, citing increased work pressure.
• Tuhin Kanta Pandey, with his vast bureaucratic experience, will be expected to address these concerns, restore internal stability, and improve morale within SEBI.
• His leadership will be crucial in ensuring a balance between internal governance reforms and maintaining SEBI’s institutional credibility.

3. Regulating Market Participants Without Stifling Innovation

One of the biggest criticisms of Buch’s tenure was that she over-regulated market participants, including brokers, merchant bankers, and mutual funds.

• Market stakeholders have expressed concerns over a lack of flexibility in regulatory frameworks, which they claim has slowed down financial product innovation.
• While Buch’s regulatory approach focused on protecting investors from risks like mis-selling and financial misconduct, some believe her reforms went too far, creating operational challenges for businesses.
• Pandey will need to strike a fine balance between market oversight and fostering an environment conducive to financial innovation.

4. Strengthening Disclosure Norms for IPOs

Another key focus for SEBI under the new chairman will be enhancing disclosure requirements for companies planning IPOs.

• This initiative has been in the works for a while, but progress has been slower than expected.
• Given India’s booming IPO market and increasing retail participation, Pandey’s ability to expedite these reforms will be closely watched.
• Investors and policymakers alike will expect SEBI to improve transparency, strengthen corporate governance norms, and ensure better investor protection in IPOs.

5. Implementing the Instant Settlement Mechanism (T+0)

The instant settlement mechanism (T+0) was announced with much enthusiasm, but its implementation has remained stalled.

• The T+0 system would allow investors to receive cash or shares immediately after a trade, significantly reducing settlement risks.
• However, technical and operational challenges have slowed down its adoption, raising concerns about whether SEBI can ensure a smooth transition to this faster settlement framework.
• Pandey’s task will be to identify the core issues delaying T+0 implementation and ensure it progresses beyond just a pilot phase.

6. Ensuring Market Integrity Amid Global Economic Uncertainty

With global financial markets facing volatility due to geopolitical tensions, inflation concerns, and monetary policy shifts, Pandey’s leadership will be crucial in maintaining stability in India’s capital markets.

• SEBI will need to monitor foreign institutional investment (FII) flows and ensure market resilience against external shocks.
• Enhancing regulatory measures to prevent market manipulation, insider trading, and financial fraud will remain a key priority.

What Market Participants Expect from the New SEBI Chairman

1. A More Collaborative and Flexible Regulatory Approach

Industry stakeholders expect Pandey to adopt a consultative approach, engaging with mutual funds, brokers, and other financial institutions before implementing new regulations.

2. Addressing Employee Grievances to Strengthen SEBI’s Internal Governance

Restoring trust and efficiency within SEBI’s workforce will be critical for ensuring smooth regulatory functioning.

3. Accelerating Pending Reforms Without Unnecessary Bureaucratic Delays

Many pending reforms, such as the new IPO disclosure norms and instant settlement mechanism, require immediate attention to boost investor confidence.

4. Creating a Balanced Regulatory Environment for Market Growth

Ensuring that regulations do not stifle innovation while maintaining investor protection and financial market stability will be one of Pandey’s biggest challenges.

Final Thoughts: A Crucial Leadership Transition at SEBI

As Tuhin Kanta Pandey steps into his new role as SEBI chairman, he inherits a complex regulatory landscape with multiple ongoing challenges.

• Balancing strict regulations with industry-friendly policies will be key to fostering market growth.
• Resolving SEBI’s internal employee grievances will help restore institutional stability.
• Implementing long-pending reforms, such as the T+0 settlement system and IPO disclosure norms, will be critical to investor confidence.
• Ensuring regulatory flexibility without compromising investor protection will shape SEBI’s approach in the coming years.

With India’s capital markets becoming increasingly important on the global stage, the decisions taken by the new SEBI chairman will define the regulatory landscape for years to come. His ability to navigate the competing interests of policymakers, market participants, and investors will determine the success of his tenure and the future direction of India’s financial markets.