SEBI Faces Scrutiny Amid Internal Scandal, Market Manipulation Fight

MUMBAI (Azat TV) – The Securities and Exchange Board of India (SEBI) is navigating a period of intense scrutiny and active regulation, marked by a high-profile internal suspension of a senior official, the ongoing legal battle against a major trading firm for alleged market manipulation, and the approval of new investment products aimed at deepening market access. These concurrent developments, unfolding in late February 2026, underscore SEBI’s critical and complex role in safeguarding investor interests and ensuring the stability and integrity of India’s burgeoning securities market.

The regulator, tasked with protecting investors and promoting market development, finds itself at the center of both external challenges to its authority and internal governance concerns. The recent actions highlight the multifaceted nature of market oversight, balancing the need for innovation with stringent regulatory enforcement and internal accountability.

SEBI’s Stance Against Market Manipulation

SEBI is currently engaged in a significant legal dispute with US-based trading firm Jane Street Group, which it accused in July 2025 of manipulating the Indian stock market. The Securities Appellate Tribunal (SAT) recently adjourned a hearing in the case on February 25, 2026, pushing further proceedings into the coming weeks. The regulator alleged that between January 2023 and March 2025, Jane Street utilized high-frequency trading strategies to artificially influence the Bank Nifty index for unlawful gains. SEBI claimed the firm employed a two-pronged strategy: one entity bought large quantities of bank stocks to boost the index, while another simultaneously placed bets in the derivatives market to profit from the index’s movement.

As a result of these allegations, SEBI ordered Jane Street to deposit Rs 4,843.57 crore, identified as illegal profits, and temporarily banned the firm from trading in Indian markets. While the trading ban was subsequently lifted after Jane Street complied with the deposit order, the firm appealed to the SAT in September 2025. Jane Street contended that SEBI had not provided sufficient information or access to critical documents for its defense and cited an internal SEBI inspection that allegedly found no evidence of market manipulation. This ongoing case is being closely watched by market participants, as it raises important questions about high-frequency trading practices, regulatory oversight, and fairness in financial markets, directly impacting investor trust and market stability.

Internal Vigilance Concerns at India’s Market Watchdog

Adding to the regulatory body’s challenges, SEBI initiated a dramatic internal action on February 20, 2026, by suspending one of its General Managers, Achal Singh, in connection with a ‘sensitive vigilance matter.’ The suspension, effective immediately under Regulation 86(1)(a) of the SEBI (Employees’ Service) Regulations, 2001, signals the contemplation of disciplinary proceedings against Singh. The official office order explicitly bars the suspended GM from entering any SEBI office premises without prior written permission and restricts his remuneration to a subsistence allowance during the suspension period.

Sources indicate that the case stems from Singh’s alleged direct interference in an ongoing investigation by the Corporate Finance Department (CFD) into C2C Advances Systems, a controversial SME IPO. He is accused of misusing his official position to extort money from the company. This incident has raised serious questions about potential systemic issues within SEBI’s key market wing, with past instances of CFD-related scams reportedly having rocked the regulator. The allegations of public servants acting as ‘profit-driven operators’ with unchecked powers underscore the critical need for robust internal governance to maintain the credibility of the institution responsible for protecting millions of investors.

Expanding Investment Avenues Under SEBI’s Oversight

Despite these significant challenges, SEBI continues its mandate to foster market development by approving new investment products. On February 25, 2026, JioBlackRock Mutual Fund received SEBI’s approval to launch a largecap fund. This new scheme, benchmarked against the BSE 100 Index (TRI) and managed by Tanvi Kacheria and Sahil Chaudhary, aims to provide long-term capital appreciation by investing predominantly in equity and equity-related instruments of largecap companies. The fund will offer a direct plan with a growth option, requiring a minimum application amount of Rs 500 for lumpsum investments and monthly SIPs.

The fund’s investment strategy allocates 80-100% to largecap equities, with smaller percentages in other equities, debt, money market instruments, and InvITs. The scheme’s riskometer categorizes the principal invested as ‘very high risk,’ providing clear information to potential investors. This approval is part of JioBlackRock’s broader strategy to expand its product suite, which includes model portfolios, SIFs, ETFs, and international exposures, following its incorporation in October 2024. As of January 31, 2026, the AMC managed 12 schemes with a total AUM of Rs 16,762 crore. Such approvals are crucial for providing diverse investment opportunities, but they also underscore SEBI’s ongoing responsibility to ensure transparency and adequate risk disclosure, thereby protecting investor interests in newly launched products.

The confluence of an internal ethics scandal, a high-stakes legal battle over market manipulation, and the continuous approval of new financial products highlights the intricate balance SEBI must strike to uphold its foundational mandate: to protect investors, ensure market stability, and promote the orderly development of India’s securities market. The agency’s ability to navigate these concurrent pressures will be a critical test of its regulatory effectiveness and institutional integrity in the years ahead.