NewKerala.com

SEBI Eyes Unlisted Share Market Regulation to Protect Investors

SEBI Chairperson Tuhin Kanta Pandey has stated the regulator is considering whether to bring India's unlisted share market under its regulatory purview. The move aims to address risks for investors, who currently have limited information as unlisted companies are not bound by continuous disclosure rules. A key concern is the significant disparity between private share sale prices and the valuations discovered during a company's IPO process. Pandey clarified that SEBI's review is in early stages, involving discussions on legal authority and the extent of possible regulation.

Key Points: SEBI May Regulate Unlisted Share Market, Says Chairperson

  • SEBI examining legal authority over unlisted firms
  • Unlisted market lacks strict disclosure rules
  • Large price gaps between private deals and IPOs
  • Regulation traditionally starts at listing stage
2 min read

SEBI may explore regulating unlisted share market: Tuhin Kanta Pandey

SEBI Chairperson Tuhin Kanta Pandey says the regulator is exploring whether to regulate India's unlisted share market to address investor risks.

"Prices agreed upon in private deals often do not match the prices discovered during the IPO book-building process, creating confusion and potential risks for investors. - Tuhin Kanta Pandey"

Mumbai, Jan 15

India's market regulator, the Securities and Exchange Board of India, is considering whether it should start regulating the country's unlisted share market, which currently operates largely outside its direct control, chairperson Tuhin Kanta Pandey said on Thursday.

Speaking on the sidelines of the Association of Investment Bankers of India's annual convention for 2025-26 here, Pandey said the issue is being discussed with the Ministry of Corporate Affairs.

"SEBI first needs to examine whether it has the legal authority to regulate companies that are not listed on stock exchanges and how far such regulation can extend," he explained.

The unlisted share market includes shares of companies that are not traded on stock exchanges.

Investors usually buy these shares through private deals, employee stock option plans or intermediaries.

Since these companies are not listed, they are not required to follow strict and continuous disclosure rules, which often leaves investors with limited or delayed information about a company's financial health and business risks.

Pandey said one of Sebi's main concerns is the large difference between prices in the unlisted market and the valuations that emerge when companies come out with an initial public offering.

"Prices agreed upon in private deals often do not match the prices discovered during the IPO book-building process, creating confusion and potential risks for investors," he stated.

He also clarified that rules followed by listed companies cannot be directly applied to unlisted firms.

Traditionally, SEBI's regulatory role begins only when a company prepares to list its shares.

On the National Stock Exchange's proposed IPO, Pandey said the market regulator is currently reviewing the exchange's settlement application.

He added that, in principle, SEBI agrees with the settlement and the matter is being examined by different committees.

- IANS

Share this article:

Reader Comments

R
Rahul R
While I agree with the intent, SEBI should be careful not to stifle the startup ecosystem with excessive red tape. The beauty of unlisted shares is the flexibility for early-stage companies. Regulation should be light-touch, focusing only on preventing fraud, not burdening compliance.
D
David E
The price discrepancy point is very valid. I've seen pre-IPO shares trade at a massive premium based on hype, only for the IPO to price much lower. Small investors get caught in the middle. SEBI stepping in could bring more rationality to the pricing.
A
Aman W
Finally! So many "investment advisors" on WhatsApp and Telegram are pushing unlisted shares of random companies with promises of 10x returns once they get listed. Public needs protection from these schemes. Hope SEBI acts fast. 🙏
S
Shreya B
They need to first clearly define the legal authority, as Mr. Pandey said. The last thing we need is a jurisdictional battle between SEBI and the Ministry of Corporate Affairs. A coordinated framework is essential for this to work.
K
Karthik V
Good move for investor protection, but I hope they also streamline the IPO process itself. Sometimes the long gap between a company filing its DRHP and actually listing creates this very volatility in the unlisted market. The entire pipeline needs review.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50