SEBI Chief Demands Forensic Muscle to Crush Market Fraud Before It Spreads
Regulators are finally waking up to the crypto playbook—just as Wall Street masters it.
The Securities and Exchange Board of India (SEBI) is scrambling to deploy forensic firepower against market manipulators. No more reactive whack-a-mole—this time, they want to spot the cracks before the whole dam breaks.
Active surveillance, algorithmic red flags, and real-time chain analysis tools are now table stakes. Too bad most scams still outrun the cops by 12 months.
Funny how 'early detection' only becomes urgent after billions vanish into offshore wallets. Maybe next they'll audit their own oversight failures.
Forensic tools
Forensic accounting, he added, must evolve from being a post-fraud tool to a proactive one. “The future of financial governance will be determined by our collective ability to anticipate risks and detect anomalies early on… As custodians of this trust, we must safeguard market integrity, the foundation that fuels investor participation and sustains capital formation,” Pandey said.
The SEBI chief gave examples of how some listed firms routed funds through subsidiaries or used circular transactions with name-lending entities to siphon off shareholder money. Preferential allotment proceeds were also misappropriated in some cases, with statutory auditors and board members failing to sound alarms.
“…SEBI has used forensic audits to uncover financial frauds. The ingenious modus operandi used to perpetrate these frauds have ranged from simple diversion of shareholder funds to the use of complex structures and transactions to circumvent regulatory safeguards,” Pandey said.
Fraud detection
“These cases suggest that some key managerial personnel, statutory auditors, audit committee members and board directors may only be following a tick-box approach to compliance,” he said. The negative impact of such financial frauds on the securities market is tremendous, he said, as they erode investor confidence, discourage genuine investment, and directly undermine market integrity.
In addition, SEBI has held interactive sessions with officials from the Central Bureau of Investigation (CBI), Financial Intelligence Unit (FIU), Serious Fraud Investigation Office (SFIO), and National Crime Records Bureau (NCRB) for strengthening its efforts against market frauds and digital scams.
The regulator has also signed memoranda with the Ministry of Corporate Affairs (MCA) and the Central Board of Direct Taxes (CBDT) to facilitate data exchange for investigations and enforcement actions.
It has introduced stricter enforcement actions, mandated shareholder approvals on significant related-party transactions, and deployed supervisory technology to flag suspicious activity. The regulator is also collaborating with the CBI, FIU, SFIO and NCRB, and has signed data-sharing agreements with the MCA and CBDT.
Published on August 1, 2025
