Mumbai, March 23 – The Securities and Exchange Board of India (SEBI) on Monday adopted a disclosure framework requiring top officials to disclose their assets and recuse themselves from related decision-making, almost two years after allegations surfaced against former chief Madhabi Puri Buch.
The SEBI board on Monday approved several recommendations of a high-level committee on "conflict of interest," which was formed immediately after current chairman Tuhin Kanta Pandey took office.
Buch, whose term ended in early 2025, faced allegations of potential conflicts of interest and non-disclosure during her tenure, making her the first market regulator chief to face such allegations while in office. Pandey, her successor, appointed the high-level panel to suggest ways to avoid similar issues in the future.
According to the SEBI board decision, the Chairman and Whole Time Members (WTMs) will be considered "insiders."
"Details of immovable property of the Chairman, WTMs, Executive Directors, and Chief General Managers may be publicly disclosed, in line with requirements applicable to Government of India All India Service (AIS) and Central Civil Services (CCS) officers."
However, details of assets and liabilities in a prescribed format must be disclosed internally to SEBI.
The board also decided to create an "ethics infrastructure," which will involve setting up an "office of ethics and compliance" to manage the conflict of interest framework for employees.
The board approved the setting up of a digital system for managing conflict of interest, a whistleblower system for reporting actual, potential, or perceived conflicts of interest, and training and development programs to foster a culture of ethical conduct.
The board also accepted recommendations regarding recusals relating to material financial interest and other circumstances requiring recusals, as outlined in the HLC report.
Additionally, the board approved a digital system and a framework for recusals to record disclosure of conflicted relationships and to process recusals, including granting approvals.
The SEBI board approved a recommendation of the high-level committee (HLC) for a uniform application of restrictions on investments and trading (in equity and equity-related instruments, excluding permitted investments in mutual funds) for the Chairman and WTMs, as currently applicable to employees.
The HLC submitted its report on November 10, but Pandey had earlier pointed to some discontent within the Sebi brass, which led to a pending decision on the matter.
Among other things, the Chairman and WTMs may be required to choose one of the four options for investments held at the time of joining: liquidate the investments, freeze the investments, sell the investments according to a trading plan, or sell the investments without a trading plan with prior approval.
Investments in equity and equity-related instruments in commercial ventures (including unlisted companies) must be fully liquidated or kept frozen during the tenure of the Chairman or the WTMs. Vested options, if any, must be exercised before joining Sebi.
The definition of "family" should be aligned for members and employees. Additionally, a member or employee must disclose any negotiations or agreements regarding future employment.
SEBI said that several key recommendations of HLC were approved by the board without modification, while the board took note of public and media comments, privacy and other concerns expressed by employees with respect to other recommendations of HLC.
The board decided that the decision of the Board on the recommendations of HLC may be suitably incorporated in the 2008 Code on Conflict of Interest for Members of the Board for voluntary adoption as per the current practice.
Additionally, after deliberations, the board decided to refer certain HLC recommendations to the Central Government for consideration. These included notifying a separate set of regulations for board members and overseeing board Members' conflicts of interest.
The next steps for implementing the recommendations of HLC include making amendments to the SEBI (Employees' Service) Regulations, 2001, revising the 2008 Code on Conflict of Interest for members of board and provide necessary operational guidelines.
Further, systems and processes would be put in place for implementing the framework for the management of conflicts of interest within Sebi.
Pandey's predecessor Buch had come under attack last year from now-shuttered Hindenburg Research, which alleged that she and her husband held "hidden" holdings in Bermuda and Mauritius entities, also drawn upon by the older brother of Adani group founder Gautam Adani, which possibly held the agency back from investigating fraud charges against the powerful conglomerate. Both Buch and the Adani group had denied all allegations.
The SEBI board also took a slew of other decisions on Monday, including allowing flexibility to foreign portfolio investors in winding up of schemes and surrendering registrations.
When asked about the issues in the private credit market in the US and if he sees any impact on India, Pandey replied in the negative.
Amid market volatility following the West Asia conflict, the Sebi chief said the regulator will work to ensure market integrity.
Meanwhile, Pandey said that Sebi will soon begin an awareness campaign for investors in association with the Association of Mutual Funds of India and the exchanges.