Sebi sets up panel to tighten conflict of interest norms for its own officials

The market regulator has set up a committee to review and strengthen the regulations governing conflict of interest and disclosures by members and officials of the Securities and Exchange Board of India (Sebi).

The high-level committee’s mandate is to “comprehensively review and make recommendations for enhancing the existing framework for managing conflicts of interest, disclosures and related matters towards ensuring the high standards of transparency, accountability, and ethical conduct of Members and Officials of the Board,” according to a Sebi statement on Wednesday.

High-level panel formed

The panel will be chaired by Pratyush Sinha, former chief vigilance commissioner, while Injeti Srinivas, former secretary, ministry of corporate affairs, will serve as vice chairman.

Members include 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. 

The panel is expected to submit its recommendations to the Sebi board within three months of its constitution.

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The decision follows allegations of conflict of interest against Madhabi Puri Buch who was Sebi chair until February. Among other things, short-seller Hindenburg Research alleged that Buch and her husband held undisclosed stakes in entities based in Bermuda and Mauritius, which purportedly had links to the Adani Group. Sebi was at the time probing allegations of fraud against the conglomerate. Adani Group denied the accusations. Buch and her husband also rejected the claims.

While enforcing the conflict of interest policies within Sebi is challenging due to the intricacies of financial holdings and indirect interests, there is a need for a “strong yet practical” monitoring and enforcement mechanism, said Ketan Mukhija, senior partner at Burgeon Law.

“The inclusion of experts from vigilance, corporate affairs, banking, regulation, and audit brings a well-rounded perspective—allowing for the creation of a balanced framework that upholds Sebi’s integrity, ensures fair and workable investment restrictions, and maintains public trust in the institution,” he said.

Jyoti Prakash Gadia, managing director at Resurgent India, lauded the credentials and experience of the committee members, expressing confidence in their ability to conduct a “comprehensive and objective” review.

The committee’s terms of reference covered a range of issues such as the “principles and processes that are required for maintaining high levels of transparency, disclosures and ethics for members and officials of Sebi”, he said.

The committee was desirable to establish the confidence of all stakeholders following recent public discussions regarding Sebi’s credibility and operations, he said. “The recommendations by the committee and meticulous implementation of the new framework is expected to go a long way in reiterating the stature of the regulator.”

The decision to establish the committee was made during Sebi’s board meeting held on March 24.

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Its terms of reference outline a comprehensive scope of work, including a thorough review of existing policies. The panel will analyze current regulations on conflict of interest, disclosures, and related matters to identify gaps or ambiguities.

The committee is tasked with proposing a strengthened framework to prevent, mitigate, and manage conflicts of interest. This includes recommendations on recusal policies, comprehensive disclosure requirements (including public disclosures), restrictions on investments, maintenance of digital records, and a robust monitoring framework.

The panel will recommend a mechanism for the public to raise concerns regarding conflict of interest and disclosures, including a clear process for examining such complaints.