Outlook 40 After 40: Sebi Working On Removing Overlap Between Mutual Fund Distributors And Advisors, Says Sebi Chairman Tuhin Kanta Pandey

As Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India (Sebi), nears completion of one year in office, he shared insights on how the market regulator was approaching policies towards making markets investor-friendly while also focusing on protecting investors against risks. Pandey spoke to Nidhi Sinha, Editor, Outlook Money, at IDFC FIRST Bank presents Outlook Money 40After40 Retirement Expo in Mumbai on February 20, 2026. He spoke at length on policy developments, particularly those aimed at improving investor protection, strengthening investment advisory norms, and enhancing detection of unregistered or misleading financial advice online. Pandey also spoke about Sebi’s ongoing efforts to improve transparency and investor awareness.

You are about to complete a year in office at Sebi. What would you say has been the most significant change or announcement for customers and investors?

I think I should not be the one saying that. Of course, I spoke about it in my speech in quite a detailed manner. There have been many investor-friendly measures since I took over, and I did touch upon those in my address.

Another thing I wanted to talk to you about is financial advice. It remains somewhat of a weak point for the financial industry. There are Sebi-registered investment advisors (Sebi RIAs), but the number is still quite low. Because of that, many other entities enter this space, some genuine, some not, which happens in most such areas. So what solution do you see going forward to address this contradiction, where investors want to go to registered advisors, but there simply aren’t enough?

I think you’re right — it is a conundrum. On one hand, we now have about 140 million investors, and the number is rising rapidly. Growth in investor participation in cities beyond the top-30 is actually much higher than in the top cities. Investing is spreading to smaller towns — almost all postcodes are now represented, whether through mutual funds or direct equity participation.

The question then becomes what kind of advice is available to these investors. And as you pointed out, the number of registered investment advisors is still relatively low.

One thing we looked at soon after I joined was how to make it easier for people to become registered advisors. We realised there were entry barriers that made licensing more difficult. That is one area where we have already worked and will continue to work — making access easier so more registered advisors can come into the system.

The second issue is incentives. If influencers can earn significant money without registration, the business case for becoming a registered investment advisor weakens. Therefore, enforcement against unregistered entities crossing the line from financial education into investment advice becomes essential.

General financial education is fine. But when it comes to investment advice, it must be regulated, registered, and governed by proper guardrails. We have been proactive in taking action against influencers who cross that line. I won’t name specific cases, but we have acted in several instances to bring discipline to this space.

We have also mandated platforms — whether Meta, Google, or others — not to carry advertisements from unregistered entities. There is now a system where such advertisements are blocked unless the entity is registered. Additionally, we have undertaken large-scale content takedowns. Over the past few months, more than 120,000 pieces of misleading or harmful investment-related content have been removed from social media platforms.

At the same time, everything must be done lawfully. We must respect people’s fundamental right to expression while ensuring they do not violate regulations.

To strengthen detection, we developed our own AI tool called Sudarshan, inspired by the Sudarshan Chakra. We started deploying it in October this year, and it has improved our detection efficiency by about 40 per cent. It works across languages, formats, videos, audio — multiple media — and helps identify regulatory violations while maintaining proper records.

This is quite remarkable, in my view. Regulators from other jurisdictions have been making enquiries about how we implemented such a system.

A related question — licences are clearly important, and investors should always check licences before taking advice. But could there also be a system where certifications authorised by Sebi help increase the number of advisors? Right now, registered advisors number around 1,000 nationwide. If you step outside Mumbai, it can be difficult to even find an RIA.

There are registered advisors in different parts of the country, and their numbers have grown after some steps we took to ease access. But quality is equally important — you cannot simply increase registrations without maintaining standards.

Certification already has a tiered structure. There are NISM courses — Level 1, Level 2, etc. Level 1 familiarises candidates with fundamentals; Level 2 develops advanced competencies. These represent minimum standards we believe are necessary.

We have, however, relaxed qualification criteria compared to earlier. Previously, academic requirements were quite strict. Now we recognise that someone without a purely economics or commerce background can still become a good investment advisor — provided they complete the necessary certifications and training.

Another area under discussion involves the large mutual fund distribution network. There appears to be some overlap between distributors and advisors. Earlier, we followed a more puritan model when framing investment advisor regulations. Now we have a working group examining whether some convergence is possible — essentially a via media approach.

This requires thorough deliberation with industry stakeholders. Discussions are ongoing.

So does that mean we might formally see mutual fund distributors entering the advisory space in the coming months or years?

I wouldn’t like to prejudge the outcome. We have identified the problem and possible solution pathways. Our process involves detailed data analysis, committee discussions, and eventually public consultation.

Until a consultation paper is issued, no options are finalised. But yes, this is an area we are seriously working on.

Just one last question — in the coming years, what can retail investors realistically expect? Maybe one big change that could transform their investing experience?

I would actually caution investors against looking for “one big idea” or “one big change.” There is rarely such a thing. Often, four or five smaller improvements together make a far bigger impact.

In fact, chasing one big idea can be dangerous. For example, many retail investors were encouraged by influencers to trade weekly options. Our studies showed that about 90 per cent of retail participants in that segment lost money because they were not equipped to handle that product.

So the search for a big idea can sometimes lead to losses.

If there is one principle I would emphasise, it is long-term compounding. That aligns very well with retirement planning — the theme of your “40After40” event. Investors should shift from short-term speculation to disciplined long-term investing. Responsible investing aligned with life goals can significantly improve financial outcomes.

We have also implemented several reforms in mutual fund regulations to improve transparency and reduce certain costs. More reforms are in the pipeline. One upcoming focus area is addressing the proliferation of thematic mutual funds, where overlaps sometimes confuse investors. We will continue strengthening investor awareness and transparency so investors can make more informed decisions.