No Test For F&O Trade, Physical Store Reopening And More: Know What Sebi Chief Has In Store For Stock Market Investors

Sebi Chief News: Securities Exchange Board of India (Sebi) chief Tuhin Kanta Pandey talked to the Press Trust of India (PTI) at length about his vision for the markets and the need for reforms and measures for investor protection.

The Sebi chief has also talked about several new measures the market regulator is likely to undertake in the future with multiple media outlets. Here's a look at some key takeaways from what the Sebi Chief has said so far:

No Test For F&O Trading

The Sebi chief told PTI that the market regulator will not introduce an aptitude test for investors who wish to trade in the Futures & Options (F&O) segment. Pandey emphasised that such a test would be 'impractical' and might lead to regulatory overreach.

"Right now, we aren't really considering any of those things… Number one, we also have to see if there will be a regulatory overreach. Will you be able to do it effectively? I mean, we do have specific players, those who are registered with the system; we do have this. For example, NISM certification is available for several reasons. Like you are a registered advisor or an IA or RA, but applying this to millions of retail traders would be a different challenge altogether," Pandey said.

Earlier in November 2024, the regulator introduced measures to restrict excessive speculation in derivatives trading. Prior to the introduction of these measures, a study by the Sebi revealed that 9 out of 10 retail investors lose money while trading in F&O instruments.

Sebi's Checks and Balances In Place

Pandey also emphasised that the regulator has sufficient checks and balances in place to mitigate issues related to fraud. He also urged investors not to get influenced by anecdotal evidence and form perceptions of frauds.

"... There are checks and balances happening; the exchanges are first-line regulators, a lot of disclosures are happening, and a lot of auditors are doing their job. So let us not think that... the systems are really not working," Pandey said.

Pandey added that the market regulator also intends to enhance the trust it has with market participants by forming a committee to look into the matters related to mandatory disclosures and recusal by the top brass of listed companies. He also added that the number of people violating norms or committing fraud is a cause of concern.

"Our (Sebi's) orders have to be detailed, investigations have to be detailed, they have to stand the scrutiny of the courts, there is a tribunal, there is a Supreme Court," he added.

Be Watchful Of SME IPOs

The Sebi chief warned investors that they should be 'watchful' while putting their money in SME IPOs. According to a report by Moneycontrol which cited Pandey, the Sebi chief urged primary market investors to not be lured by short-term returns and not get misled by wrongful advice.

"Our view is that disclosures are important. People should look at disclosures. So much information is being made available to you (investors); you should be watchful. The returns may look temporarily very attractive in terms of capital gains, but they actually may not be true," Tuhin Kanta Pandey said.

Notably the SME IPO space has come under the market regulator's notice in 2024. Earlier in 2024, Sebi tightened the regulatory framework for SME IPOs, with primary market documents being screened and approved by the exchanges instead of the regulator. Additionally, given the surge in listing day gains, the market regulator also capped the listing day gains made by SME IPO issues at 90 per cent.

FPI Mood Positive

In the month of April, Foreign Portfolio Investors (FPIs) continued to remain net buyers for the second consecutive month as they purchased equities worth Rs 2,735.02 crore. Prior to March the FPIs had resorted to relentless selling as they continued to remain net sellers for five consecutive months between October 2024 and February 25.

According to a report by Moneycontrol, Pandey said that the mood among foreign portfolio investors (FPIs) is 'very positive', and they have a lot of faith in India's growth story. Notably the Sebi chief has recently returned from the US, where he met many foreign investors at a conference organised by the International Organisation of Securities Commissions (IOSCO).

"I think the overall mood has been very positive. This was my sense… I met plenty of FPI investors in Washington D.C., in New York, in Boston… There were very positive things about India in the meetings that we had under the Financial Stability Engagement Group, under the IMF-IOSCO track," Pandey told Moneycontrol.

Sebi's Brick-and-Mortar Return

Pandey mentioned in an interview with Moneycontrol that the market regulator is likely to reopen its physical stores. The move is aimed at increasing investor awareness and providing new investors key information related to the market in a language which they understand.

"I think to some extent, physical, our footprints have, you know, gone down in the last few years. We have to probably ramp up. We have to have a review. Because for whatever we might say about the electronic campaign and so on. But there is also a lot of merit in being there on the ground. And India is a vast, diverse country, and lots and lots of investors are now coming from smaller centres, tier two cities, and tier three cities," Pandey said.

The market regulator had a pan-India presence with as many as 17 stores till 2023. However, 16 out of the 17 stores were closed in a phased manner. If the market regulator goes through with the reopening drive, stores across regions such as Jammu, Shimla, Dehradun and Panaji were closed. Later, Bangalore, Patna, Jaipur, Kochi, Ranchi, Bhubaneswar, Guwahati, Lucknow, Chandigarh, Raipur, Hyderabad and Vijayawada will be reopened.