Sebi's Ananth Narayan cautions fintechs and brokers not to turn a blind eye towards malpractices

Sebi Ananth Narayan

Markets regulator Securities and Exchange Board of India (Sebi) whole-time member Ananth Narayan cautioned fintechs and brokers against turning a blind eye towards trading malpractices.

Narayan, who was speaking at the second edition of Moneycontrol Fintech Conclave in Mumbai on December 18, said: “When you turn a blind eye to the malpractices, then we can’t trust you. What we would much rather do is if you see something wrong happening, please come and tell us. We would much rather hear it from you than through inspections or media or from other intelligence.”

According to him, there are two types of errors that a regulator can make, first when their inaction caused a scam and second when over-regulation to control the first type of error comes in the way of good people doing business.

“We give equal importance to both. Our job as a regulator, as per the SEBI act, is about investor protection, market development and market regulation. Those are the three pillars of the mandate, which essentially means capital formation,” Narayan said.

This, Narayan insisted that Sebi cannot do alone and it needs support and advice from the industry participants.

Over the last decade, fintech startups such as Zerodha, Groww, Dhan, Upsotx and Angel One, popularly called as discount brokers, have merged as the largest brokerage houses fuelling a trading boom among the retail investors.

Narayan said that these industry entrepreneurs know more about what is happening on the ground than the regulator and their inputs and suggestions are necessary for Sebi to formulate correct guidelines.

“While you think of us as the nasty regulator who issues circulars by the dozen, our job is to ensure that the capital formation cycle continues in a robust sustained manner,” Narayan said.

Recently, Sebi issued a direction to regulate Futures and Options trading, a major revenue source for discount brokers as well as the stock exchanges. According to multiple Sebi research papers, more than 90 percent of retail traders lose money on F & O trading.

“If you have an association, which can give a unified voice, that helps us. We need trusted advisors. When we come up with regulations, all this consultation can translate into do’s and don’ts. This consultation is led by industry we would love to hear from you.

However, he cautioned the industry players that Sebi could listen to them if only they were willing to alert Sebi on malpractices.

“This is not snitching. This is taking care of your ecosystem and preserving the goose laying golden eggs. You will see that we are more than happy to listen to your advice. And teaching us what needs to be done,” Narayan added.