A high-level committee appointed by the Securities and Exchange Board of India (Sebi) has proposed a far-reaching revamp of conflict-of-interest and disclosure norms across the regulator’s hierarchy, in what could become the most comprehensive set of internal reforms at Sebi in years.
The committee has proposed that candidates for the roles of Sebi chairman, whole-time member (WTM), and other lateral entrants make pre-appointment disclosures of all actual, potential and perceived conflicts of interest, both financial and non-financial, to the appointing authority. The goal is to strengthen transparency at the appointment stage itself, and ensure that individuals with personal, professional, or financial entanglements that could compromise decision-making are identified in advance.
Once in office, senior Sebi officials will also face mandatory public disclosures of their assets and liabilities, a first for the regulator’s top brass. The committee has recommended that the chairman, WTMs and employees with the rank of chief general manager and above file such declarations annually. Part-time members, who are not involved in day-to-day regulation, may be exempted from public disclosures but will still have to report relevant interests internally.
The high-level committee was formed in March to undertake a comprehensive review of provisions relating to conflict of interest, disclosures pertaining to property, investments, liabilities, and so on.
The move follows conflict-of-interest allegations against Madhabi Puri Buch, who was Sebi’s chairperson until February. In August 2024, short-seller Hindenburg Research had alleged, among other things, that Buch and her husband held undisclosed stakes in entities based in Bermuda and Mauritius that purportedly had links to the Adani Group. Sebi was probing allegations of fraud against the conglomerate at the time. Adani Group denied the accusations, as did Buch and her husband.
Office of Ethics and Compliance
Under the proposed system, all Sebi board members and employees, including those on secondment and contractual appointments, will be required to make initial, annual, event-based and exit disclosures of their assets, liabilities, trading activities, family relationships, and professional or relational interests.
These will be submitted to a newly proposed Office of Ethics and Compliance (OEC) and overseen by an independent Oversight Committee on Ethics and Compliance (OCEC). The OEC, headed by a chief ethics and compliance officer (CECO) at executive-director rank, will manage ongoing disclosures, while the OCEC will provide independent oversight.
In addition, all Sebi employees and board members could be required to internally disclose the names and relationships of relatives, as defined by the Companies Act, along with any other professional or relational interests that could pose a conflict. The definition of ‘family’ for these purposes has been expanded to include spouses, dependent children (including adopted and stepchildren), legal wards, and others who are substantially dependent on the individual.
However, investment restrictions, which prevent officials from trading in or holding certain securities, will only apply to the employee’s family, not the extended circle of relatives or associates. The panel recommended that the same restrictions imposed on Sebi employees under its Employees Service Regulations (ESR) should be uniformly applied to the chairman and WTMs.
They may invest in pooled vehicles such as mutual funds, provided the schemes are professionally managed and regulated by a recognised financial regulator. Even then, investments in any one scheme should not exceed 25% of their financial portfolio. Part-time members will be exempt from these restrictions but must still disclose their holdings and abstain from trading on unpublished price-sensitive information.
Four options for new joinees
Upon joining, the chairman and WTMs will have to choose one of four options for their pre-existing investments: liquidate, freeze, or sell them according to a pre-approved trading plan, or sell them outright with prior approval. The panel also recommended explicitly including the chairman and WTMs under the definition of “insider” as per Sebi’s insider-trading regulations.
In terms of ethical conduct, the committee proposed a ban on the chairman and WTMs accepting gifts — directly or indirectly — from any person or entity with whom they have official dealings, except for items of small value given at public events or ceremonies.
It also stressed the need for a robust and technology-enabled recusal system. While the primary onus of declaring conflicts lies with the individual, Sebi should build a digital repository of financial and non-financial disclosures capable of automatically flagging actual or potential conflicts using materiality thresholds, it said. Summaries of recusals by senior officials — including the chairman, WTMs, part-time members, and senior staff — should be published in Sebi’s annual report to enhance transparency.
The committee, constituted after Sebi’s March 2025 board meeting, was chaired by Pratyush Sinha, former chief vigilance commissioner. Injeti Srinivas, former secretary, ministry of corporate affairs, was the vice chairperson. Members included Uday Kotak, founder and director, Kotak Mahindra Bank; G. Mahalingam, former executive director, Reserve Bank of India and former whole-time member, Sebi; Sarit Jafa, former deputy comptroller and auditor general; and R Narayanaswamy, former professor, IIM, Bangalore.
