SEBI toughens tech-driven techniques to protect retail investors from scams: Tuhin Kanta Pandey

SEBI toughens tech-driven techniques to protect retail investors from scams: Tuhin Kanta Pandey

He informed that people new to the market were misled by fake trading apps, digital channels, and WhatsApp groups with promises of high returns

The Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey has stated that the market regulator has sharpened its surveillance and technology-driven enforcement to curb rising pre-investment scams to lure investors.

Currently, India has over 140 million unique investors. And as the number rises, the scammers are diverting funds before investors even interact with SEBI-regulated intermediaries.

The Chairman said that SEBI observed many new and intending investors were being misled by fake trading apps, digital channels, and WhatsApp groups with promises of high returns. The fraudsters then diverted funds to their personal accounts.

Investor caution must evolve beyond mere awareness to informed action, especially given the country's expanding retail base, Pandey, who completed one year at the helm on 01 March, added.

Speaking further on pre-investment frauds, he said, "Someone who is intending to come is actually being trapped by promises of high returns. It doesn't even come to SEBI or to any broker because the person has already fallen prey.”

Terming such cases "many," Pandey said that SEBI is set to tackle the menace and safeguard investors' money from fraudsters.

The Chairman stressed the importance of tools such as SEBI Check, developed to help users verify the legitimacy of entities soliciting investments. It encouraged wider dissemination of validated platforms and UPI handles to safeguard payments.

Even as he explained that such measures were not new, Pandey highlighted that widespread adoption remained critical to combating cyber fraud. SEBI would hold campaigns and has also launched a project to roll out a multimedia, multilingual campaign to ensure that scammers are unable to trick people.

Pandey sought investor discipline and suggested long-term investment strategies such as Systematic Investment Plans (SIPs) and pooled vehicles over speculative trading in complex instruments like derivatives. He said that several retail participants engaged in without adequate understanding of the procedures.

While reiterating SEBI’s efforts for investor education, Pandey warned against unrealistic returns touted by unregistered "finfluencers".

He also spoke about supervisory technology on the investor protection framework, emphasizing the regulator’s ongoing and evolving deployment of artificial intelligence (AI) and data tools. He said that these monitored market misconduct, flagged misleading content and tracked unregistered advisories in real time.

Commenting on the high-level committee on conflict of interest, the Chairman added that the recommendations of the committee were deliberated upon and would be “discussed in the next board meeting.”

SEBI had constituted the panel in March 2025 after Pandey took charge. The committee submitted its report in November, recommending disclosures by officials above the rank of chief general manager.

On the recent technical glitches at Multi Commodity Exchange of India Limited (MCX) and National Securities Depository Limited (NSDL), the SEBI chief stated that, though occasional, such incidents were not uncommon given the complexity and high degree of interconnectivity in market infrastructure systems. However, the two incidents were of a different nature. "In both cases, SEBI was kept informed throughout and closely monitored the developments.”

He suggested that Portfolio Management Services (PMS) should not be directly compared with mutual funds (MFs), as the two operate under different models.

Pandey explained, "MF is a different industry. Let us not compare the two because one is a pooled vehicle and the other a customized operation. We have to look at what issues each faces.”

The current PMS regulations were introduced in 2020, and certain aspects now warrant re-examination. Among the consideration is portability. Presently, investors shifting from one portfolio manager to another must open a separate demat account, resulting in the sale and repurchase of securities.

The SEBI official furthered information on initiatives to make the system more efficient and progressive.

He said, "Currently, there is a requirement of opening a separate demat account. So, you have to practically shift the securities. You have to sell securities here and buy the securities here, whereas we can make things much easier because the securities are in the name of the holder, and he is merely shifting the portfolio manager, PMS operator, so fund manager.”

While speaking on concerns relating to PMS returns and sales practices, Pandey said that all such issues would be examined comprehensively. He added, "We will look at all concerns after due deliberation.”

Meanwhile, in the NSDL happening, market participants had acted swiftly, responsibly and with maturity to ensure continuity of operations. As the issues were initially addressed by shifting operations to the disaster recovery (DR) site and other contingency measures, the situation was eventually stabilised and fully resolved.

The SEBI official added that in both instances, a root cause analysis (RCA) was conducted within a defined timeframe.

He informed that the findings were examined by the Technical Advisory Committee (TAC), a panel comprising domain experts. After which, appropriate remedial measures were undertaken and the issue was under control.

Pandey further said that the market regulator would continue to minimize the possibility of recurrence and strengthen safeguards by identifying systemic vulnerabilities.