Sebi approves tighter conflict-of-interest and disclosure framework
Mumbai, Mar 23, 2026
New investments in pooled vehicles will be permitted, provided they are professionally managed by regulated market intermediaries
The Securities and Exchange Board of India (Sebi) on Monday approved a comprehensive overhaul of its framework governing conflicts of interest, disclosures, code of conduct, and recusal norms for employees, including the chairman and whole-time members (WTMs).
The recommendations made by Sebi’s high-level committee (HLC) will now be referred to the central government. However, Sebi Chairman Tuhin Kanta Pandey said the regulator will voluntarily implement the measures even before formal amendments are notified.
As part of the revamp, immovable property details of the chairman, WTMs, executive directors, and chief general managers may be publicly disclosed, in line with norms applicable to central civil services and All India Services officers. Sebi will also introduce a digital system and formal recusal framework to record disclosures of conflicted relationships and track recusal decisions.
New investments in pooled vehicles will be permitted, provided they are professionally managed by regulated market intermediaries. Upon assuming office, the chairman and WTMs will have the option to liquidate, freeze, divest through a trading plan, or sell investments with prior approval.
The chairman and WTMs will now be classified as ‘insiders’. The definition of “family members” has also been expanded to include spouses, dependent children, legal wards, and relatives by blood or marriage.
Restrictions will be imposed on direct equity investments by family members, except in unlisted securities, ESOPs forming part of compensation, and discretionary portfolio management services. These restrictions will apply prospectively, with existing holdings grandfathered.
Sebi has also capped exposure to a single intermediary at 25 per cent of the portfolio. Investment and trading restrictions in equity and equity-related instruments — other than permitted mutual fund investments — will be uniformly applicable to the chairman and WTMs. Members will be required to either liquidate or freeze such holdings during their tenure, including in unlisted commercial ventures. Vested stock options must be exercised prior to joining.
Proposals for a separate regulatory framework for board members, along with the creation of an Oversight Committee on Ethics and Compliance (OCEC), have also been referred to the government.
Separately, Sebi approved netting of funds for foreign portfolio investors (FPIs) for outright cash market transactions, to be implemented by December 31, 2026. The move is aimed at reducing costs and operational challenges such as foreign exchange slippages, particularly during index rebalancing. However, such transactions will continue to be settled on a gross basis.
The regulator also relaxed the “fit and proper person” criteria for intermediaries, removing automatic disqualification upon initiation of an economic offence probe; disqualification will now arise only upon conviction. The decision comes amid multiple legal challenges to the existing provisions.
In addition, Sebi expanded investment avenues for infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) to mitigate concentration risks. These entities will now be allowed to invest in units of liquid mutual fund schemes with a credit risk value of at least 10 (currently 12), under Class A-I or B-I categories.
Privately placed InvITs will be permitted to invest up to 10 per cent of asset value in greenfield infrastructure projects. InvITs with leverage of up to 70 per cent will also be allowed to raise additional debt for capital expenditure, major maintenance of road assets, and other permitted uses.
Further, InvITs will be allowed to retain investments in special purpose vehicles (SPVs) even after the conclusion or termination of concession agreements, addressing issues such as pending claims, litigation, and tax assessments.
Sebi also approved measures to provide flexibility to alternative investment funds (AIFs) in winding up schemes and surrendering registration.
In a move aimed at boosting retail participation in the social stock exchange, Sebi reduced the minimum investment requirement for individual investors in Social Impact Funds under AIFs from Rs 2 lakh to Rs 1,000.
[The Business Standard]
