Regulators in India are often accused of taking their consumer protection roles too lightly, but the Securities and Exchange Board of India (SEBI), under the chairmanship of UK Sinha, has been an exception. Under his watch, the regulator has ruthlessly trimmed transaction costs for mutual fund investors, issued dozens of orders against big-name market offenders, and fought pitched battles with unregulated entities such as PACL, to secure investor interest. It is possible that these credentials, coupled with a desire not to rock the boat in these turbulent times, prompted the Centre to extend Sinha’s term for a sixth year.

There are three specific areas where he can make a difference in the next one year. One, having framed a host of new rules to tighten the investor protection framework for the capital markets, it is time for SEBI to pay greater attention to its market development role. Today, the stock market boasts of state-of-the-art trading systems and is among the largest in world in terms of its listed universe and trading volumes. But for all this, it is questionable whether it is performing a basic function — that of providing risk capital to new enterprises. Public markets in India remain a closed club dominated by Old Economy firms, while issuers from sunrise sectors (such as digital businesses, retail and consumer services, for instance) mainly tap private sources for funds. Without a robust pipeline of new listings, the capital market is at risk of losing both its vibrancy and its relevance to the economy. SEBI needs to re-examine whether, in its anxiety to frame water-tight rules for investor protection in the primary markets, it has set the bar too high for new issuers seeking to list. The second area is in evolving a regulatory framework for the commodity market. Unlike securities, commodities are non-standardised and lack either a robust spot pricing mechanism or a national market. Commodity trading is also currently over-run by speculators and cartels (as opposed to hedgers). To rewrite the rules, SEBI may have to first set right these structural deficiencies in the market itself, which will require engaging with the Centre, State governments and market participants. It will also have to acquire expertise and skills in this new segment.

Finally SEBI must adopt a more data-driven approach, both in framing regulations and enforcing them. Having won exceptional penal powers a year ago, SEBI has used them unsparingly to issue scores of notices, penalties and disgorgement orders against market offenders over the last couple of years. But a majority of these actions continue to be stymied by appeals, or even overturned by the Securities Appellate Tribunal. Backing its regulatory actions with more data, fine-tuning its investigative process and honing in-house expertise in legal and market-related issues, can help SEBI buttress its reputation as a fair regulator, and not merely a strict one.

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