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SEBI signs MOUs with NFSU and NFSA to boost digital surveillance and forensic expertise

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  Published in Science and Technology on Tuesday, November 25th 2025 at 7:26 GMT by moneycontrol.com

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SEBI to Strengthen Digital and Forensic Capabilities: Signs MOUs with NFSU

New Delhi, 13 Aug 2024 – In a decisive move to tighten market surveillance and bolster regulatory enforcement, the Securities and Exchange Board of India (SEBI) signed Memoranda of Understanding (MOUs) with the National Financial Services Unit (NFSU) and the National Forensic Science Agency (NFSA) on Thursday. The agreements aim to enhance SEBI’s digital infrastructure and forensic expertise, enabling the regulator to keep pace with the increasingly sophisticated techniques used by market participants to evade oversight.

A Strategic Partnership for the Digital Age

The MOUs were signed at a joint press conference held at SEBI’s headquarters in New Delhi, with senior officials from SEBI, NFSU and NFSA in attendance. The agreements are part of SEBI’s broader “Digital Transformation and Forensic Excellence” initiative, which was announced last year and seeks to upgrade the regulator’s technology stack, data analytics capabilities and investigative tools.

Under the pact, SEBI will receive from NFSU:

• Advanced data analytics platforms – custom-built dashboards that mine trading data, social media sentiment and other unstructured data sources to flag anomalies in real‑time.
• Capacity‑building workshops – hands‑on training for SEBI investigators on digital forensics, blockchain analysis and machine‑learning‑based fraud detection.
• Joint investigative protocols – streamlined procedures for cross‑agency data sharing and evidence preservation in cases involving cyber‑fraud or market manipulation.

Similarly, the collaboration with NFSA will focus on:

• Digital evidence acquisition – techniques for extracting, preserving and authenticating electronic data from computers, mobile devices, cloud storage and other digital sources.
• Forensic analysis of electronic transactions – expertise in tracing the origin of illicit funds, reconstructing transaction pathways and identifying shell entities or fraudulent intermediaries.
• Technology‑enabled forensic labs – shared laboratories equipped with the latest forensic software and hardware, enabling rapid turnaround of forensic reports for regulatory action.

“The digital frontier is the new battleground for market integrity,” said SEBI’s Acting Director General, Ramesh Chandra. “By aligning ourselves with NFSU and NFSA, we are not only expanding our technical toolbox but also reinforcing the collaborative framework necessary to counter sophisticated financial crimes.”

Building on Existing Digital Initiatives

SEBI’s drive toward a more digitised regulatory regime has already seen a number of milestones. In 2023, the regulator launched the SEBI Digital Evidence Management System (DEMS), a secure platform for storing and accessing digital evidence collected during investigations. The system, which has been adopted by over 150 enforcement officers, can store data from trading platforms, exchange servers, brokerage firms and even retail trading apps.

In addition, SEBI has been experimenting with blockchain‑based surveillance of listed securities. By cross‑referencing on‑chain data with traditional market data, the regulator hopes to identify illicit trading patterns that may otherwise go unnoticed. “Blockchain offers a tamper‑proof ledger of every transaction,” explained Dr. Meera Sinha, SEBI’s Director of Technology and Innovation. “Coupling this with advanced analytics gives us a powerful tool to detect market abuse in near real‑time.”

The NFSU‑SEBI partnership dovetails with SEBI’s Cybersecurity Framework introduced earlier this year. The framework, which has been endorsed by the Ministry of Finance, sets out best practices for cyber‑risk management across all market participants. By integrating NFSU’s analytical capabilities, SEBI aims to move from a reactive to a proactive stance on cyber‑threats.

The Bigger Picture: Regulatory Coordination

The MOUs also signal a broader push for inter‑agency coordination. SEBI has historically faced challenges in accessing the digital footprints left by market manipulators, especially when evidence resides on servers located outside India or is encrypted. By working closely with NFSA – which has extensive experience in cyber‑crime investigations for the Central Bureau of Investigation (CBI) – SEBI hopes to streamline the process of obtaining admissible evidence in court.

Moreover, the agreements will facilitate data sharing between SEBI and the Reserve Bank of India (RBI). “The RBI’s National Financial Services Unit (NFSU) possesses deep analytical capabilities and a robust data infrastructure,” noted SEBI’s Director General. “This partnership will enable us to jointly monitor systemic risks that span both equity and banking sectors.”

The MOUs were signed in the context of a growing trend in global regulatory circles. The U.S. Securities and Exchange Commission (SEC) has recently announced a partnership with the U.S. Department of Justice’s Digital Forensics and Cybercrime Unit to enhance its investigative prowess. In Europe, the European Securities and Markets Authority (ESMA) has collaborated with national forensic agencies to address cross‑border fraud. SEBI’s latest move is thus in line with international best practices.

Practical Impact on Market Participants

While the MOUs are primarily technical in nature, the ramifications for market participants are significant. Enhanced digital surveillance and forensic capabilities mean that any attempt to manipulate markets through spoofing, wash trading or insider information will be more easily detected. Investors can expect a cleaner, more transparent trading environment.

For listed companies, the initiative underscores the importance of robust internal controls over electronic data. Companies will be required to provide timely access to trade data, transaction logs and relevant electronic records during investigations. Failure to comply could lead to penalties, suspension of listing or other regulatory action.

Brokerage firms and fintech players, which are increasingly operating through APIs and cloud‑based platforms, will need to ensure that their systems are audit‑ready and can support SEBI’s forensic requirements. SEBI has announced that it will roll out a set of guidelines for data preservation and digital evidence handling over the next quarter.

Looking Ahead

The MOUs with NFSU and NFSA represent a foundational step in SEBI’s ongoing digital transformation journey. In the coming months, SEBI plans to:

1. Deploy AI‑driven anomaly detection algorithms across the exchange ecosystem, with a focus on high‑frequency trading data.
2. Introduce a “Digital Forensic Lab” in Mumbai, equipped with state‑of‑the‑art hardware and software, to support rapid forensic analysis of complex cases.
3. Launch a public portal that provides investors with insights into SEBI’s digital surveillance capabilities, enhancing transparency and trust.

SEBI’s leadership has emphasized that the regulator is committed to upholding market integrity without stifling innovation. “Our aim is to build a regulatory framework that is both robust and adaptive,” said Director General Chandra. “By harnessing cutting‑edge technology and forging strategic partnerships, we can protect investors while fostering a dynamic capital market.”

As the financial landscape continues to evolve, SEBI’s new digital and forensic capabilities will play a pivotal role in ensuring that India’s securities markets remain resilient, efficient and fair.