SEBI okays stricter conflict-of-interest and disclosure guidelines
SEBI okays stricter conflict-of-interest and disclosure guidelines
SEBI okays stricter conflict-of-interest and disclosure guidelines
The Securities and Exchange Board of India (SEBI) has consented to remodel its guidelines regarding conflicts of interest, disclosures, code of conduct, and recusal norms for employees, including the chairman and whole-time members (WTMs).
The regulator’s high-level committee recommendations will be referred to the Central government.
However, SEBI Chairman Tuhin Kanta Pandey stated that even before the government formally notifies the amendments, the regulator would voluntarily implement the measures.
Pandey, who took charge in 2025, outlined the review of the code of conduct as his priority. This followed concerns and allegations raised about the former chairperson.
According to the restructuring, immoveable property details of the chairman, whole-time members (WTMs), executive directors, and chief general managers, could be disclosed publicly, as per the rules applicable to Central Civil Services and All India Services officers.
The SEBI chief added that the regulator would also initiate a digital system and a formal recusal framework to record disclosures of conflicted relationships and track recusal decisions. Thereby, new investments in pooled vehicles will be permitted, provided they are professionally managed by regulated market intermediaries.
He furthered that on assuming office, the chairman and WTMs will have the option to liquidate, freeze, divest through a trading plan, or sell investments with prior approval. Henceforth, they will be classified as ‘insiders’.
The definition of ‘family members’ has also been expanded. It includes spouses, dependent children, legal wards, and relatives by blood or marriage.
Moreover, direct equity investments by family members will be restricted, except in unlisted securities, employee stock ownership plans forming part of compensation, and discretionary portfolio management services. The limitations will possibly be applied, with existing holdings exempted.
SEBI has also capped exposure to a single intermediary at 25 percent of the portfolio. Now, members must either liquidate or freeze such holdings during their tenure, including in unlisted commercial ventures. In addition, vested stock options must be exercised before joining.
In another context, SEBI has approved the netting of funds for foreign portfolio investors (FPIs) for outright cash market transactions, to be implemented by 31 December 2026.
The purpose is to reduce costs and operational challenges, including foreign exchange slippages, particularly during index rebalancing. However, such transactions will still be settled on a gross basis.
SEBI has also relaxed the ‘fit and proper’ person criteria for intermediaries. It has discontinued automatic disqualification upon the initiation of an economic offence probe. From now on, disqualification would happen only upon conviction.
The decision was taken amid multiple legal challenges to the existing norms.
The market regulator has also expanded investment avenues for Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) to mitigate concentration risks.
They will now be allowed to invest in units of liquid mutual fund (MF) schemes with a credit risk value of at least 10 (currently 12), under Class A-I or B-I categories. Meanwhile, privately placed Invits will be permitted to invest up to 10 percent of asset value in greenfield infrastructure projects.
To give a fillip to retail participation in the Social Stock Exchange (SSE), SEBI has reduced the minimum investment requirement for individual investors social impact funds (SIF) under alternative investment funds (AIF) from Rs.2 lakh to Rs.1,000.