Mumbai The Securities and Exchange Board of India (SEBI) is developing a second surveillance system to identify potential risks and ‘bad elements’ associated with listed companies. According to SEBI Whole-Time Member Kamlesh Varshney, the regulator has almost completed the blueprint for the new surveillance system. The objective is to strengthen the existing monitoring framework and improve the ability to detect early signs of potential irregularities in the market.
Varshney said SEBI already has a surveillance mechanism to monitor market activities. The existing system helps identify trading patterns, unusual activities and potential regulatory violations. However, with the growth of the market and increasing complexity in activities involving listed companies, there is a growing need for additional technological capabilities for surveillance. The proposed second system is being developed in this direction.
The new surveillance mechanism will focus on identifying elements and activities associated with listed companies that could pose risks to market transparency, investor interests or the regulatory framework. The objective is to identify warning signs before a potential issue develops into a larger dispute or causes significant damage, thereby making the regulator’s surveillance capabilities more effective.
The existing framework primarily helps monitor trading activities and related patterns in the market. The second system is expected to expand the scope of surveillance. Under the new mechanism, risks associated with companies and activities of related parties could also be brought within the scope of analysis. This could help SEBI assess multiple indicators associated with a company or its related parties together and identify potential risks more effectively.
SEBI has been increasingly focusing on the use of technology and data analysis for market surveillance. With the rise in trading volumes, an increase in the number of investors and the growing use of digital platforms, the volume of data that the regulator needs to monitor has also increased significantly. In such an environment, technology-based systems capable of identifying suspicious activities have become increasingly important for effective market oversight.
Through the second surveillance system, SEBI is seeking to make the identification of potential risks more systematic and effective. However, the regulator has not yet disclosed details about the final technical structure of the system, its implementation timeline or the specific parameters that will be used for surveillance. It is therefore not yet clear what type of data and indicators the new system will use to identify potential ‘bad elements’.
One of the key objectives of SEBI’s surveillance framework is to maintain investor confidence in the securities market. Suspicious activities involving listed companies may have an impact beyond an individual company or its stock and could also affect broader market sentiment and investor confidence. Early identification of potential risks could help the regulator gather relevant information and take appropriate action when required.
Varshney’s remarks indicate that SEBI is moving ahead with plans to add another layer to its existing surveillance framework. Once implemented, the new system is expected to strengthen the regulator’s ability to identify potential risks associated with listed companies, monitor suspicious activities and maintain greater transparency in the securities market.
