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Informist, Wednesday, Nov. 12, 2025

 

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--SEBI releases panel's report on review of conflict of interest norms 
--SEBI panel: Current conflict of interest, disclosure norms inadequate 
--SEBI panel: Conflict of interest, disclosure norms needs strengthening 
--SEBI panel recommends comprehensive definition of conflict of interest 
--SEBI panel recommends expanding definition of family relationships 
--SEBI panel recommends expanding definition of conflicted relationships 
--SEBI panel recommends multi-tier disclosure of assets of senior SEBI staff 
--SEBI panel suggests multi-tier disclosure of liabilities of top SEBI staff 
--SEBI panel recommends uniform investment restrictions for SEBI staff 
--SEBI panel suggests staff's recusal if conflict of interest established 
--SEBI panel suggests creation of new ethics infrastructure 
--SEBI panel suggests strengthening channels for whistleblowers 
--SEBI panel: Current conflict of interest norms lack legal backing 

MUMBAI – The high-level committee appointed by the Securities and Exchange Board of India to review the regulator's conflict of interest and disclosure framework has recommended sweeping changes to the current norms applicable to its members and officials. The regulator made the committee's report public Wednesday.

 

The committee has recommended several changes as it found SEBI's current framework "inadequate" and the need to strengthen it to "promote transparency and public trust". "Key features (of recommendations) include uniform definitions, robust disclosure and investment restrictions, stricter gift and post-retirement norms, structured recusal processes, public transparency, and institutionalized ethics oversight," the committee said in its report.

 

The committee has recommended that SEBI's chairman, whole-time members, and employees at the level of chief general manager and above be required to make a public disclosure of assets and liabilities statement. It, however, specifically exempts part-time members from this disclosure "as they do not handle SEBI's day-to-day regulatory activities."

On recusals, which investors and market participants consider to be a very important matter, the committee has recommended that SEBI put in place a robust system that will flag actual, potential, and perceived conflict of interest based on materiality consideration and taken from the digital repository of financial and non-financial disclosures. The primary onus of identifying and declaring a conflict of interest, however, will lie with the individual.

 

The committee has also made a proposal on the whistle-blower system. It said the market regulator must create and implement an anonymous, secure, and confidential system "for reporting actual, potential, or perceived conflicts of interest by board members, employees, and external stakeholders, including market infrastructure institutions, market intermediaries, market participants, and the public."

It also urged SEBI to use technology that incorporates data analytics and artificial intelligence to prevent, predict, detect, and address conflicts of interest. Apart from technology, SEBI must run programmes internally to test board members' and relevant employees' knowledge and understanding of what constitutes a culture of ethical conduct.

The committee has proposed that there should be uniform application of restrictions on investments and trading to chairman and whole-time members, as applicable to employees under SEBI's internal rules. It recommended that part-time members "may be exempt from the investment restrictions, but they would be obliged to make necessary disclosures and not trade based on UPSI (unpublished price sensitive information."

 

Arguing that conflict of interest causes breach of public trust and undermines the legitimacy of institutions, including and especially that of regulators, and results in compromise of impartiality in decision-making, the SEBI-constituted panel proposed expanding the definition of family for board members. Family should include spouse, dependent children, a person for whom a member is legal guardian, a person related by blood or marriage to the employee or his/her spouse, the panel said.

 

ON CURRENT FRAMEWORK

The panel found SEBI's current framework as "inadequate" and that there are several differences between norms for members and employees. The SEBI Code on Conflict of Interests for Members of Board lacks "legal backing" and "enforceability" and can be treated as "nothing more than a voluntary statement of expected conduct," it said.

 

The current framework asks chairman and members to recuse themselves in case of conflict of interest but similar guidance is missing for employees. "As a result, there might be inconsistencies across the organization," the panel said.

 

The panel said the current framework does not have a process to deal with whistleblower complaints related to conflict of interest. The panel also found inconsistency in definitions of "family" and "conflict of interest".  End

 

Reported by Rajesh Gajra and Anshul Choudhary

Edited by Ashish Shirke

 

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