SEBI Conflict-of-Interest (CoI) and Disclosure Overhaul

Context:

A high-level committee, chaired by Pratyush Sinha (former CVC), with Injeti Srinivas as vice-chair, was constituted by SEBI in March 2025 under Chairperson Tuhin Kanta Pandey. The committee aimed to strengthen CoI regulations following past allegations against former SEBI chairperson Madhabi Puri Buch.

The review highlighted gaps in SEBI’s existing CoI framework, including insufficient disclosure requirements and inadequate safeguards for board members and senior officials.

Key Recommendations:

Comprehensive Disclosure

• Scope: Chairperson, Whole-Time Members (WTMs), Chief General Manager level and above.
• Required Disclosures:
  • Assets and liabilities
  • Trading activities
  • Family relationships
  • Actual, potential, and perceived conflicts (financial and non-financial)
• Stages: At appointment, annually, upon key events, and at exit.
• Definition of Family: Expanded to include spouse, dependent children, wards, and other financially dependent relatives.
• Part-Time Members (PTMs): Exempt from some obligations due to limited day-to-day involvement.

Insider Status and Trading Restrictions

• Chairperson and WTMs designated as “insiders” under SEBI’s insider trading norms.
• Existing equity or equity-linked instruments (e.g., ESOPs) may be:
  • Liquidated
  • Frozen
  • Sold under pre-approved trading plans
• New investments must be in regulated pooled schemes, capped at 25% of personal portfolios.
• Restrictions extend to spouses and financially dependent relatives.

Conflict Management and Recusals

• Officials must recuse themselves from matters involving conflicts.
• Annual summary of recusals to be publicly published.

Ethics, Compliance, and Oversight

• Office of Ethics & Compliance (OEC) and Oversight Committee on Ethics & Compliance (OCEC) to be established.
• Ban on gifts connected to official dealings, with limited exemptions for nominal public tokens.
• Deployment of AI-enabled monitoring systems to flag potential conflicts.
• Secure anonymous whistle-blower mechanism for staff, intermediaries, and the public.
• Mandatory training and certification programme on ethical conduct.

Regulatory Enforcement

• Separate, enforceable CoI regulations for SEBI board members, replacing the voluntary code.
• Amendments to SEBI (Employees’ Service) Regulations, 2001 to implement new mandates for staff.

Objectives

• Ensure transparency, accountability, and integrity in SEBI operations.
• Prevent misuse of insider information and official influence.
• Build public confidence in SEBI as a market regulator.
• Align SEBI practices with international standards for regulatory ethics and governance.