SEBI panel proposes ‘wider’ conflict of interest regulations

A high-level committee under markets regulator SEBI has proposed expanding the definition of family, strengthening disclosures and placing investment restrictions on board members under its new framework on overhauling conflict of interest regulations, according to a report released on Wednesday (November 12, 2025).

The Securities and Exchange Board of India had formed the high-level committee headed by former CVC chief Pratyush Sinha following allegations of violating conflict of interest regulations by former SEBI chief Madhabi Puri Buch, from which she was later exonerated.

The committee recommended the formation of an office of ethics and compliance headed by an executive director level officer to oversee the framework.

Significant proposals include the expansion of the definition of family to “any person for whom the member/employee serves as a legal guardian and any other person related to, by blood or marriage to the employee or to his spouse and substantially dependent on such employee.” These rules will apply to employees and board members.

In the 2008 guidelines, the definition of family was limited to spouse and children. Further, the word ‘relative’ will now be defined akin to the Companies Act, 2013, and will be applied to both members and employees. The list of relatives in companies rules 77(2) includes parents, spouse, children and their spouses, and siblings. This definition is in addition to the existing definitions in SEBI rules.

Investment restrictions will, however, be applied only to family members as defined in the new framework, the report stated.

The committee also recommended multiple levels of conflict of interest management. “The committee recommends initial, annual, event-based and exit [on the date of demitting office in SEBI] disclosures of assets, liabilities, trading activities and family and other relationships for board members and employees to SEBI’s proposed Office of Ethics and Compliance (OEC) and the Oversight Committee on Ethics and Compliance (OCEC),” the report stated.

The committee proposed the chairperson, whole time members (WTM), executive directors, and chief general managers disclose assets and liabilities. All other employees must make internal disclosures. Part-time members shall not be subjected to the disclosure norms as they are not involved in the day-to-day activities of SEBI, the committee said. On lateral entry, the chairperson and WTMs must make disclosure of “actual, potential, and perceived conflicts,” the committee proposed defining each of them.

The chairperson and WTMs will be allowed to invest in mutual funds and similar products as long as they do not exceed one-fourth of their portfolios.

The committee also recommended that SEBI put in a “robust framework” to decide on recusal in case of conflict of interest.

The chief compliance officer will be the nodal officer to oversee the recusal process. It was also proposed that the summary of the recusals be mentioned in the annual reports.