Much-feared PUSTA Regulations: Not really on the table, not pursuing them, says SEBI chairman Tuhin Kanta Pandey

The regulations were proposed in May 2023, and the essence of it was that, if there was suspicious activity detected in the market, the onus was on the individual or entity to prove their innocence.

The Securities and Exchange Board of India (SEBI) is not pursuing the proposed SEBI (Prohibition of Unexplained Suspicious Trading Activities in the Securities Market) Regulations – PUSTA, in market parlance -- as there are concerns within the Board on the possibility of abuse of the powers under the regulations, said SEBI chairman Tuhin Kanta Pandey.

“It is not really on the table because there were certain concerns about it in the Board. It was like putting an onus on the other and whenever you shift the onus, it is a very big thing in law. When you shift the onus, it becomes an onerous law,” said Pandey during an exclusive interaction with Moneycontrol.

“We also have to balance the rights of privacy, personal rights, and liberty with the rights of investigating agencies. We have to be very clear that we are living in a democratic place where… the power is not to be abused any time,” he added.

“At the moment, I don’t think we should push (it) through… it was discussed but it was not accepted in the Board so we will rest it there. And then we will see if there is a time when with proper modifications… but right now we are not pursuing it,” said Pandey who took charge as SEBI chairman on March 1.

Also Read: SEBI Board refuses to clear the much-feared PUSTA Regulations, say sources

The SEBI chief’s comments would come as huge relief as it was widely believed that the proposed regulation would have given the watchdog wide powers to initiate investigations and pass orders.

The much feared PUSTA Regulations was presented to the SEBI board in December last year but it failed to get the board’s nod.

The regulations were proposed in May 2023, and the essence of it was that, if there was suspicious activity detected in the market, the onus was on the individual or entity to prove their innocence.

Many segments of the market were quick to register their concerns and even protest, saying that this regulation went against the principles of natural justice, which states that an entity is innocent until proven guilty.

SEBI's reasons for proposing such a regulation was recorded in its consultation paper, and had to do with the advancement in technology that made it possible for bad actors to erase every proof of their involvement in bad practices. That is, the regulator's surveillance team may pick up suspicious activity in one or more trading accounts but the regulator's investigations into this activity may be hampered because the evidence may have been destroyed.

However, it was widely believed that SEBI was working towards creating a more acceptable form of the regulations that could be pass muster with the board of the regulatory body. More importantly, the regulator was mulling certain checks and balances to address some of the concerns raised by both, the board and market participants.