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Mint
a day ago
- Business
- Mint
Why Sebi is drowning in record investor complaints—from finfluencers to faulty compliance
Investor complaints against listed companies jumped to record highs in FY25, but not for the reasons one might assume. Far from signalling a collapse in corporate behaviour, experts say the spike reflects a more vocal investor base, easier online filing, and the Securities and Exchange Board of India's (Sebi) tightened surveillance. Yet, the surge also exposes cracks that persist beneath the surface: companies continue to falter on basic compliance, back-end resolution remains sluggish, and a new layer of risk has emerged with finfluencer-led mis-selling. At the same time, Sebi's enforcement arm has been flexing more muscle. Settlements have scaled up to record levels, scrutiny of advisers and pseudo-educators has intensified, and the regulator is leaning on new digital tools to keep pace with a market where retail investors are louder and expectations are higher. Complaints surge, but why? According to the latest annual report of Sebi, stock exchanges received 12,473 complaints against listed firms in fiscal year 2024–25, up 43% from 8,726 a year earlier. Of these, over 12,200 were resolved, with 691 pending at year-end, typically involving missed dividends, delays in corporate actions, or disputes over rights and bonus issues. On SCORES 2.0, Sebi logged more than 68,000 complaints. Combined with CPGRAMS and SECURE, total cases were about 71,000, with just over 4,000 outstanding actionable grievances at year-end. Rolled out in April 2024, SCORES 2.0 auto-routes complaints, imposes a 21-day ATR deadline, and allows a two-stage review with auto-escalation—shortening resolution timelines. CPGRAMS is the Centralized Public Grievance Redress and Monitoring System, a government-run online platform for citizens to file complaints with various public authorities, while SECURE refers to a new online system being developed by Sebi specifically for investors to lodge their grievances. Experts caution the jump reflects digitisation and awareness rather than deteriorating corporate conduct. 'The surge reflects basic compliance lapses colliding with a more empowered and vocal retail investor base," explained Sonam Chandwani, managing partner at KS Legal & Associates. 'For instance, an investor who previously might have ignored a delayed dividend because the process of complaint was cumbersome; today, the same grievance is lodged within minutes on the portal." She added that operational lapses such as repeated delays in crediting bonus shares or inadequate disclosures around related party transactions continue to dominate complaints. 'While Sebi has fixed the front end of grievance capture, companies have yet to strengthen the back end of compliance and investor relations." she said. Kunal Sharma, founder of Taraksh Lawyers & Consultants, said, 'Investors are speaking up more, but the response mechanism hasn't yet kept pace with their expectations." He added the friction has shifted from filing to closure as corporate back-ends lag a more responsive investor base. Advisory ecosystem in the crosshairs If grievance redress is Sebi's front line of defence, its crackdown on advisers and finfluencers shows the regulator widening the battlefield. Beyond issuer lapses, Sebi has intensified action against investment advisers (IAs) and research analysts (RAs), including penalties, cancellations, and shutdown directives, while stepping up scrutiny of unregistered advisory on social media. The campaign targets 'education' or 'training' models used to disguise advisory, with enforcement orders against select entities, including action in the Asmita Patel matter, and fresh circulars and consultations to curb live-market data use by educators and restrict promotions by unregistered entities. Chandwani noted persistent grey zones: 'Enforcement action against such actors is episodic; one entity is banned, only for several others to emerge under new names. She argued that definitional clarity and broader coverage are needed to net disguised models. 'Unless Sebi broadens its interpretation of what constitutes advice to include indirect and disguised forms, it will be akin to plugging leaks in a sinking ship," Chandwani said. Advanced surveillance will be pivotal, experts said. 'Sebi will need to go beyond traditional monitoring and adopt AI tools to scan social media content in real time, map referral and follower networks, and trace fee flows between influencers, platforms, and registered intermediaries. This is critical to detect hidden revenue-sharing and pseudo-advisory activity that currently slips through the cracks," Sharma said. The systemic risk posed by finfluencers remains a concern. 'Gaps remain around enforcement speed and jurisdictional overlaps with social media platforms," Narinder Wadhwa, MD & CEO of SKI Capital Services Ltd said. 'Influencers need to be checked, as on the pretext of advising, they are often found mis-selling or creating unrealistic expectations for retail investors," Wadhwa added. To channel activity into regulated pipes, Sebi has eased access for genuine entrants—relaxing qualification norms, lowering entry barriers with refundable deposits in lieu of high net-worth requirements, and centralising fee collection. 'These steps have reduced friction, especially for smaller players, while core safeguards remain unchanged so investor protection has not been diluted", Sharma said. Settlements scale up Even as complaints and finfluencers test Sebi's bandwidth, its enforcement arm has been scaling up settlements. Applications climbed to 703 in FY25 from 434 in FY24; orders passed rose to 284 from 114; and collections jumped to about ₹799 crore from around ₹94 crore, largely due to a handful of outsized cases. 'The drastic rise in the settlement amount can be attributed to a few cases like the settlement order in the TAP matter," Vasudha Goenka, partner at Cyril Amarchand Mangaldas observed. TAP refers to the National Stock Exchange's Trade Allocation Practices and related access controls examined in connection with co-location–era systems, where certain market participants allegedly gained unfair advantages. NSE and others settled the TAP system matter with Sebi for ₹643.05 crore in October 2024, significantly boosting FY25 collections. Looking ahead, Wadhwa said enforcement may increasingly home in on copy-trading schemes, broker–influencer referral arrangements, and courses or pseudo-educational products that mask advice. 'Ensuring quick, visible action here would send a strong deterrence signal and protect new entrants into capital markets," he said. The road ahead Sharma warned the complaint curve next year could be reshaped by sophisticated, tech-driven risks: 'AI-driven scams mimic official institutions, producing convincing frauds at scale. The complaint curve next year is likely to be shaped by more complex, tech-driven risks," he said. Chandwani expects a shift from reactive enforcement to 'pre-emptive rulemaking," with liability extending across the influencer–intermediary chain.
Mint
5 days ago
- Business
- Mint
What Sebi's proposed broker rule changes mean for algo trading and compliance
Next Story Neha Joshi From algos to qualified stock brokers, the draft cleans up three decades of circulars, hardwires investor safeguards and streamlines compliance. Public comments open till 3 September. Sebi has included definitions of 'algorithmic trading', which is order generated using automated execution logic and 'execution only platform (EOP)', a digital/online platform that facilitates subscription, redemption and switch transactions in direct plans of mutual fund schemes. Gift this article The Securities and Exchange Board of India (Sebi) has issued a consultation paper proposing a ground-up rewrite of the 1992 Stock Brokers Regulations to simplify compliance, codify key circulars, and align the rules with today's tech-driven markets. It has invited public comments until 3 September. The Securities and Exchange Board of India (Sebi) has issued a consultation paper proposing a ground-up rewrite of the 1992 Stock Brokers Regulations to simplify compliance, codify key circulars, and align the rules with today's tech-driven markets. It has invited public comments until 3 September. Mint breaks down what changes most for brokers, investors, and markets. What are the proposed definitions? Sebi has included definitions of 'algorithmic trading', which is order generated using automated execution logic and 'execution only platform (EOP)', a digital/online platform that facilitates subscription, redemption and switch transactions in direct plans of mutual fund schemes. Sebi also deleted the definition of a 'small investor' as the threshold of ₹ 50,000 was considered an outdated classification. Legal experts who advise brokers believe the proposed definitions may be too broad or missing out on spelling out exceptions. Sonam Chandwani, managing partner of KS Legal, said the proposed algorithmic trading definition is so broad that it risks capturing everything from basic order-routing tools to high frequency trading (HFT). 'This approach could subject low-risk participants to disproportionate compliance obligations designed for far more sophisticated and potentially disruptive trading systems." Chandwani said. Also Read | Sebi to reboot 30-year-old broker rules for a tech-first market How will registration and governance change? Sebi's consultation paper has specified that at least one designated director must be resident in India (182+ days per financial year) for broker-companies at registration consideration. It also specified that brokers must intimate Sebi (via an exchange) and other market infrastructure institutions (MIIs) of any 'material change" in registration information, not just change in control. Change-in-control approvals are to be routed through an exchange. Lawyers said the new 'material change" intimation will raise compliance overhead and may trigger disputes unless Sebi/exchanges clearly define scope, timelines, and formats through circulars. 'What is material change has not been defined in the proposed regulations. This additional requirement may increase the compliance burden on brokers, and the absence of a clear definition for 'material change' could lead to differing interpretations and potential disputes," said Akshaya Bhansali, managing partner at Mindspright Legal. What is changing for large brokers designated as QSBs? Sebi has proposed to rely on size/scale metrics only for Qualified Stock Brokers (QSB) designations. The metrics will now include active clients, client assets held with the broker, trading volumes, end-of-day client margin obligations, and proprietary trading volumes. Compliance and grievance scores, Sebi suggested, will not be qualifying criteria, as it puts additional burden of compliance on an aspect that is already monitored. Experts said this move is essential. 'While these requirements do increase compliance and operational costs, the large customer bases and high transaction volumes handled by QSBs make it essential for ensuring transparency and maintaining the credibility of market intermediaries," said Prakarsh Gagdani, chief executive officer (CEO) at Torus Digital. However, Narinder Wadhwa, managing director & CEO of SKI Capital Services Ltd, said the debate of compliance burden for QSBs being proportionate or overly stringent remained, potentially affecting competitiveness. How is recordkeeping and digitisation being streamlined? Sebi has proposed permitting electronic maintenance of books or records, essentially removing physical-security-era requirements, which includes paper contract note copies. Brokers must inform exchanges (not Sebi directly) where books/records are maintained, Sebi said, aligning submissions and communication through the exchanges. 'Changes in documentation, compliance technology, and reporting structures could require significant investment. There could be possible shifts in client onboarding norms, record-keeping formats, and real-time reporting obligations", Wadhwa said. How will fees and net worth requirements change? The consultation paper removes references to the outdated 1990s transition-year and has standardised fee payment processes and timelines through exchanges and online gateways. Exchanges collected these fees segment-wise. Sebi also proposed to remove the fixed base net worth and the formula-based variable net worth in the current regulations tied to client cash balances at brokers. The regulator reasoned that the provisions became less relevant after it introduced the mandatory upstreaming of client funds to clearing corporations. Through this, the investors' clear credit balances are transferred by the broker to the clearing corporation every day. Experts said the absence of clarity on how 'variable net worth" will be computed created uncertainty for capital planning. 'The shift of variable net worth to circulars means Sebi can change the formula quickly. Helpful if upstreaming lowers balances, but risky if they widen what counts. Large brokers can absorb swings; smaller ones may face sharper, less predictable capital demands", Ajay Kejriwal, executive director at Choice Equity Broking, said. What is the new power to relax strict enforcement? The regulator proposed an enabling provision to relax strict enforcement in specified circumstances such as undue hardship, procedural or technical issues, factors beyond control, and non-relevance for a class. It proposed including a mechanism for confidential treatment of requests or responses for up to 180 days. Legal experts said the discretion seemed inherently subjective. 'Without clearly defined parameters, market participants may challenge decisions as being arbitrary. Further, the provision allows for confidential treatment of such requests and Sebi's responses. So, such relaxations will not be in the public domain for up to 180 days (or not at all if withdrawn)", Bhansali said. Chandwani echoed the view and said that without precise criteria and published interpretive guidance, this flexibility could fuel interpretational uncertainty and litigation. Will inspections increase or be better coordinated? Beyond Sebi's inspection powers, recognised stock exchanges, clearing corporations, and depositories may conduct inspections as per their by-laws, the consultation paper said. Sebi and MIIs will be allowed to conduct joint inspections, aiming to avoid multiple duplicative checks. Lawyers said without a clearly defined jurisdictional hierarchy, regulated entities could be subjected to overlapping inquiries into the same issues. 'This not only creates procedural inefficiency but also heightens the risk of conflicting conclusions between authorities", Chandwani said. What timelines and operational impact should brokers expect? Industry sources note that adaptation windows for paperwork/policy updates could be a few months, with longer lead times for tech/algo controls and full QSB governance uplift; Sebi historically staggers implementation via circulars and master circular updates. 'Most brokers could adapt in six months for paperwork and policy updates, nine months for tech/algo compliance, nine months for full QSB governance upgrades, with likely phased timelines for any new net worth formula, giving smaller brokers extra breathing room", Kejriwal said. 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Mint
5 days ago
- Business
- Mint
Mint explainer: Sebi moots reboot of 1992 broker rulebook
The Securities and Exchange Board of India (Sebi) has issued a consultation paper proposing a ground-up rewrite of the 1992 Stock Brokers Regulations to simplify compliance, codify key circulars, and align the rules with today's tech-driven markets. It has invited public comments until 3 September. Mint breaks down what changes most for brokers, investors, and markets. What are the proposed definitions? Sebi has included definitions of 'algorithmic trading', which is order generated using automated execution logic and 'execution only platform (EOP)', a digital/online platform that facilitates subscription, redemption and switch transactions in direct plans of mutual fund schemes. Sebi also deleted the definition of a 'small investor' as the threshold of ₹50,000 was considered an outdated classification. Legal experts who advise brokers believe the proposed definitions may be too broad or missing out on spelling out exceptions. Sonam Chandwani, managing partner of KS Legal, said the proposed algorithmic trading definition is so broad that it risks capturing everything from basic order-routing tools to high frequency trading (HFT). 'This approach could subject low-risk participants to disproportionate compliance obligations designed for far more sophisticated and potentially disruptive trading systems." Chandwani said. How will registration and governance change? Sebi's consultation paper has specified that at least one designated director must be resident in India (182+ days per financial year) for broker-companies at registration consideration. It also specified that brokers must intimate Sebi (via an exchange) and other market infrastructure institutions (MIIs) of any 'material change" in registration information, not just change in control. Change-in-control approvals are to be routed through an exchange. Lawyers said the new 'material change" intimation will raise compliance overhead and may trigger disputes unless Sebi/exchanges clearly define scope, timelines, and formats through circulars. 'What is material change has not been defined in the proposed regulations. This additional requirement may increase the compliance burden on brokers, and the absence of a clear definition for 'material change' could lead to differing interpretations and potential disputes," said Akshaya Bhansali, managing partner at Mindspright Legal. What is changing for large brokers designated as QSBs? Sebi has proposed to rely on size/scale metrics only for Qualified Stock Brokers (QSB) designations. The metrics will now include active clients, client assets held with the broker, trading volumes, end-of-day client margin obligations, and proprietary trading volumes. Compliance and grievance scores, Sebi suggested, will not be qualifying criteria, as it puts additional burden of compliance on an aspect that is already monitored. Experts said this move is essential. 'While these requirements do increase compliance and operational costs, the large customer bases and high transaction volumes handled by QSBs make it essential for ensuring transparency and maintaining the credibility of market intermediaries," said Prakarsh Gagdani, chief executive officer (CEO) at Torus Digital. However, Narinder Wadhwa, managing director & CEO of SKI Capital Services Ltd, said the debate of compliance burden for QSBs being proportionate or overly stringent remained, potentially affecting competitiveness. How is recordkeeping and digitisation being streamlined? Sebi has proposed permitting electronic maintenance of books or records, essentially removing physical-security-era requirements, which includes paper contract note copies. Brokers must inform exchanges (not Sebi directly) where books/records are maintained, Sebi said, aligning submissions and communication through the exchanges. 'Changes in documentation, compliance technology, and reporting structures could require significant investment. There could be possible shifts in client onboarding norms, record-keeping formats, and real-time reporting obligations", Wadhwa said. How will fees and net worth requirements change? The consultation paper removes references to the outdated 1990s transition-year and has standardised fee payment processes and timelines through exchanges and online gateways. Exchanges collected these fees segment-wise. Sebi also proposed to remove the fixed base net worth and the formula-based variable net worth in the current regulations tied to client cash balances at brokers. The regulator reasoned that the provisions became less relevant after it introduced the mandatory upstreaming of client funds to clearing corporations. Through this, the investors' clear credit balances are transferred by the broker to the clearing corporation every day. Experts said the absence of clarity on how 'variable net worth" will be computed created uncertainty for capital planning. 'The shift of variable net worth to circulars means Sebi can change the formula quickly. Helpful if upstreaming lowers balances, but risky if they widen what counts. Large brokers can absorb swings; smaller ones may face sharper, less predictable capital demands", Ajay Kejriwal, executive director at Choice Equity Broking, said. What is the new power to relax strict enforcement? The regulator proposed an enabling provision to relax strict enforcement in specified circumstances such as undue hardship, procedural or technical issues, factors beyond control, and non-relevance for a class. It proposed including a mechanism for confidential treatment of requests or responses for up to 180 days. Legal experts said the discretion seemed inherently subjective. 'Without clearly defined parameters, market participants may challenge decisions as being arbitrary. Further, the provision allows for confidential treatment of such requests and Sebi's responses. So, such relaxations will not be in the public domain for up to 180 days (or not at all if withdrawn)", Bhansali said. Chandwani echoed the view and said that without precise criteria and published interpretive guidance, this flexibility could fuel interpretational uncertainty and litigation. Will inspections increase or be better coordinated? Beyond Sebi's inspection powers, recognised stock exchanges, clearing corporations, and depositories may conduct inspections as per their by-laws, the consultation paper said. Sebi and MIIs will be allowed to conduct joint inspections, aiming to avoid multiple duplicative checks. Lawyers said without a clearly defined jurisdictional hierarchy, regulated entities could be subjected to overlapping inquiries into the same issues. 'This not only creates procedural inefficiency but also heightens the risk of conflicting conclusions between authorities", Chandwani said. What timelines and operational impact should brokers expect? Industry sources note that adaptation windows for paperwork/policy updates could be a few months, with longer lead times for tech/algo controls and full QSB governance uplift; Sebi historically staggers implementation via circulars and master circular updates. 'Most brokers could adapt in six months for paperwork and policy updates, nine months for tech/algo compliance, nine months for full QSB governance upgrades, with likely phased timelines for any new net worth formula, giving smaller brokers extra breathing room", Kejriwal said.
The Hindu
15-07-2025
- Business
- The Hindu
Jane Street transfer ₹4,843.6 crore to SEBI, seeks lifting restrictions
A week after the Securities and Exchange Board of India (SEBI) passed an interim order against Jane Street for alleged market manipulation, the U.S.-based investment firm has completed the transfer of ₹4,843.6 crore to an escrow account, the regulator said in a statement on Monday. Jane Street informed SEBI that this action was taken 'without prejudice to their rights and remedies which remain available to them in law and equity,' the statement read. The investment firm also requested that the conditions be relaxed as it had complied to the interim order, which the capital markets watchdog is examining, SEBI said. 'The deposit, while indicative of cooperation, does not preclude SEBI from concluding that the trades were in violation of the PFUTP Regulations. SEBI may also invoke Section 15HA to impose monetary penalties if it finds that the trades were fraudulent or manipulative in nature. Further investigative steps or proceedings before SAT could also follow, depending on whether the regulator is satisfied with the submissions made by Jane Street,' said Sonam Chandwani, Managing Partner at KS Legal & Associates. 'Jane Street may contend that its trading activity was a result of a legitimate algorithmic strategy based on publicly available information, devoid of any manipulative intent,' she added. While Prevention of Unfair Trade Practices Regulations underline the violations, the trade strategies and the means that are considered manipulation are not mentioned. 'What needs to be determined is whether the concerned noticees have orchestrated transactions that was indicative of fraudulent and manipulative behaviour,' said Yogesh Chandhe, a securities lawyer and partner with Shardul Amarchand Mangaldas. Jane Street reportedly claimed that it was just the arbitrage that was being used and not manipulation. While legally this might look open to interpretation, traders who deal with futures and options call it a clear case of manipulation. 'Arbitrage is an opportunity which exists in the market. It is not an opportunity that you create and then take it to your advantage. That is wrong,' said Preeti K Chabra, derivatives trader and founder of Trade Delta, a derivatives trading firm. 'SEBI's message, by preponderance of probability, is clear that, if any high frequency trader crosses the boundary and engages in manipulative tactic of this nature, then SEBI has the necessary expertise and infrastructure to investigate, no matter how sophisticated or a cutting-edge technology is being adopted by a high frequency trader,' Mr. Chandhe said.
The Hindu
01-07-2025
- Business
- The Hindu
AI in Legal Education: The Hindu's webinar with experts from NUJS, KS Legal and Law Firm Ready
Case backlogs have been a persistent issue for the Indian judiciary. To resolve it, AI-powered technologies—including Machine Learning (ML), Natural Language Processing (NLP), Optical Character Recognition (OCR), and Predictive Analytics are now being leveraged to automate administrative tasks, improve case tracking, and enhance crime prevention. The Government of India has allocated a total of ₹7210 Crore for the e-Courts Phase III project for judicial digital transformation. Within this budget, ₹53.57 Crore is specifically earmarked for the integration of AI and Blockchain technologies across High Courts in India. This deployment of AI is not limited to the judiciary, but top-tier law firms in the country have also adapted AI tools for routine work. AI has changed workflows by streamlining research, drafting, and due diligence while raising important questions around ethics, bias, and the future of legal education. To keep up with these developments, law schools need to update their curricula with AI integration to ensure students remain employable. Some institutes have taken initial steps towards AI teaching and learning. In the long run, though, institutes will need to provide students with practical, hands-on exposure to AI tools. Students need to be taught to adapt to technology while preserving the core principles of legal education. They need to sharpen their critical assessment skills to verify AI-generated content, check legal citations, and ensure jurisdictional relevance. To discuss how this change can be brought forth, The Hindu will host a webinar titled 'Gamechanger: Teaching AI to law students, lawyers', on July 5 at 5:00 p.m. The panellists include Shouvik Kumar Guha, Associate Professor, NUJS; Sonam Chandwani, Managing Partner, KS Legal & Associates; Rohit Sharma, Founder, Law Firm Ready. The webinar will be moderated by Ravina Warkad, who works at the education vertical of The Hindu. Register now for free to ask questions and interact with the panellists. Those who ask the three best questions will receive a free online subscription to The Hindu. Panellists Shouvik Kumar Guha, Associate Professor, NUJS Shouvik Kumar Guha is currently serving as an Associate Professor of Law and Technology at The West Bengal National university of Juridical Sciences (NUJS). He is also the Founding Director of the Centre for Law, Literature and Popular Culture, the Associate Director of the Centre for Aviation and Space Laws, and the Assistant Director of the Centre for Financial and Regulatory Governance Studies, the Centre for Competition Laws and Centre for Law and Technology at NUJS. He is also a TEDx speaker, a Senior Research Fellow (Non-Resident) at the Vidhi Centre for Law and Policy, Associate Research Fellow (Non-Resident) at the Centre for Responsible Artificial Intelligence (CeRAI), IIT Madras, a Visiting Faculty at the Rajiv Gandhi School of Intellectual Property Law, IIT Kharagpur, and at the Indian Institute of Management, Rohtak, as well as an Honorary Adjunct Professor at the Institute for Advancing Intelligence (IAI) of TCG Centres for Research and Education in Science and Technology (TCG CREST). Sonam Chandwani, Managing Partner, KS Legal & Associates Sonam Chandwani is the Managing Partner at KS Legal & Associates and heads the firm's Corporate Litigation Practice. She specialises in commercial structures, commercial litigation, mergers and acquisitions generally, with an emphasis on large-scale and complex commercial litigation including contract law, trade practices, real estate disputes and finance issues across a range of industry sectors. She advises on insolvency matters and her expertise covers all forms of dispute resolution, arbitration and mediation. Rohit Sharma, Founder, Law Firm Ready Rohit Sharma is an alumnus from the National University of Juridical Sciences (NUJS), Kolkata. After working with organisations such as Cyril Amarchand Mangaldas, Jansahas, he founded Awaaz Leadership Labs(ALL) and Law Firm Ready. His organisation has so far trained 10,000+ law students from over 650 law schools in the country. He is currently working on building differential learning pedagogies in legal education and working towards reforms in clinical legal education. Mr. Sharma has also served as researcher at Lakshmi Mittal South Asian Institute, Harvard University, where he researches on 'History of Punishment in India'. (2022-2025). He is the conceptualiser of NUJS Diversity Report, MP Migrants Report, Vernacular Legal Blogs Series(JILS) and Reforms in Legal education Interview Series (JILS). (For any feedback or suggestions, reach out to us at education@
