SEBI proposes a comprehensive review of its existing regulations and codes concerning conflict of interest, disclosures of assets, investments, and related matters, applicable to its Board Members and Officials. This initiative aims to ensure these provisions remain relevant and aligned with current ethical and governance standards. To conduct this review, SEBI seeks to establish a High-Level Committee (HLC) composed of experts from various sectors. The HLC will evaluate existing policies, recommend improvements to prevent and manage conflicts of interest, and establish mechanisms for public concerns. The committee will also consider global best practices. The goal is to enhance transparency and maintain public trust by ensuring high ethical standards within SEBI. The HLC is expected to submit its recommendations within three months.
Source: SEBI Press Release No.15/2025 Dated: 24/03/2025
Securities and Exchange Board of India
Review of Provisions and Constitution of High- Level Committee on Conflict of Interest, Disclosures and related matters
1.0 Objective
1.1 This Board Memorandum proposes to seek approval of the Board for the following:
1.1.1 Review of provisions on Conflict of Interest, Disclosures pertaining to property, investments, liabilities etc. and related matters in respect of Members and Officials of Board;
1.1.2 Constitution of a High-Level Committee (HLC) for this purpose;
1.1.3 Terms of Reference for the HLC;
2.0 Background
2.1 The “Code of Conflict of Interest for Members of Board” (Code), which is applicable to Members of the Board (including Chairman) was adopted by the Board at its meeting held on December 4, 2008 to ensure that the Board conducts itself in a manner that does not compromise its ability to accomplish its mandate or undermine public confidence in the ability of Members to discharge their responsibilities. The Code specifies the general principles to avoid conflict, the procedure for declaration of interest/conflict as soon as the same arises or where there is existence of apprehension of conflict, procedure for managing the conflict, procedure for public to raise conflict of interest, disclosure of transaction in shares, maintenance of disclosures, acceptance of gifts, etc. A copy of the Code is placed at Annexure I.
2.2 This Code was formulated in addition to the following provisions:
2.2.1 Section 7A of the SEBI Act, 1992 and Regulations 9 of the SEBI (Procedure for Board Meetings) Regulations, 2001 – Member not to participate in meetings in certain cases;
2.2.2 Regulation 11 of the SEBI (Procedure for Board Meetings) Regulations, 2001 – Declaration of fidelity;
2.2.3 Rule 3 (1) and 19 A (1) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992 – Dealing with financial and other interest of Members as are likely to affect prejudicially their functions as Members;
2.2.4 Rule 3(4) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992 – Dealing with acceptance of employment after demitting of Office.
The aforementioned provisions are detailed at Annexure II.
2.3 SEBI Officials are governed by SEBI (Employees’ Service) Regulations, 2001 (ESR), which inter-alia specifies the provisions on private trading, restrictions on investments, speculation in stocks, shares, investments, not to misuse official position, acceptance of gifts, declaration and approvals relating to moveable, immovable and valuable property etc.
3.0 Rationale for review of provisions related to conflict of interest
3.1 The Code was adopted by the Board in the year 2008. A comprehensive review of the Code is needed to ensure that it remains effective, relevant and aligned with evolving governance and ethical standards. There have also been reports in the media in the recent past calling for a review of the Code which has remained unchanged for over 16 years. Transparency, integrity and clarity are essential for maintaining public trust and ensuring market confidence. It is also desirable to suitably adopt global best practices for maintaining the high level of integrity and managing situations of conflict-of-interest at all levels within the organization.
3.2 It is therefore proposed that a comprehensive review of existing provisions relating to conflict of interest & disclosures pertaining to property, investments, etc. may be carried out and a High-level Committee (HLC) may be constituted for this purpose. The HLC may consist of eminent persons and experts with relevant background and experience in the constitutional / statutory/ regulatory bodies, government / public sector, private sector and academia. Executive Director of HRD may be the Member Secretary and provide necessary support and services to the HLC.
3.3 The proposed objective of this HLC 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. The HLC may accordingly identify potential sources of conflicts of interest including those arising from property, financial interest, investments, assets, liabilities, past employment, family and personal relationships etc. The HLC may also consider the prevailing best practices in the government and regulatory organizations both in India and foreign jurisdictions while making its recommendations.
3.4 The Terms of Reference for the High-level Committee are proposed as follows:
3.4.1 Review the existing policies and frameworks governing conflict of interest, disclosures & related matters and identify any gaps or ambiguities
3.4.2 Recommend a robust framework for preventing, mitigating and managing conflict of interest including a recusal policy, disclosure requirements covering public disclosures, provisions pertaining to restriction on investments, maintenance of digital records and framework for monitoring, etc.
3.4.3 Recommend a mechanism for members of the public to raise concerns pertaining to conflict of interest, disclosures including process to examine complaints
3.4.4 Any other related matter as considered appropriate
3.5 The HLC may not be constrained by the boundaries set by the existing provisions on conflict of interest and disclosures and may advise on introducing new requirements as deemed appropriate. The HLC, if required, may also invite experts/stakeholders for discussion.
3.6 The HLC may submit its recommendations within 3 months from the date of constitution of the HLC, which shall be placed before the Board for consideration.
4.0 Proposals
4.1 The Board is requested to approve the following proposals:
4.1.1 Constitution of a High- Level Committee (HLC) as indicated at paras 3.2 and 3.3 above;
4.1.2 The Terms of Reference for the HLC as indicated at para 3.4 above;
4.2 The Board may authorize Chairman to initiate the review of the Code and ESR as proposed in this Memorandum including constitution of the High- Level Committee and matters incidental thereto.
Enclosures:
Annexure I –Code of Conflict of Interest for Members of Board (5 pages);
Annexure II –Extracts of Section 7A of SEBI Act, Regulation 9 & 11 of SEBI (Procedure for Board Meetings) Regulations, 2001 and Rule 3(1), 3(4) & 19A (1) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992 (1 page);
Annexure I
Code on Conflict of Interests for Members of Board
This Code has been adopted by the Board in its meeting held on December 4, 2008 to ensure that it conducts in a manner that does not compromise its ability to accomplish its mandate or undermine the public confidence in the ability of Member(s) to discharge his responsibilities.
Definitions
1. In this Code, unless the context otherwise requires, –
1. “family” means spouse and dependent children below 18 years of age.
2. “conflict of interests” means any personal interest or association of a Member, which is likely to influence the decision of the Board in a matter, as viewed by an independent third party.
3. “Member” means a Member of the Board and includes Chairman of the Board.
4. “regulated entity” means a company which is listed or proposed to be listed on a recognized stock exchange(s) or an intermediary registered with SEBI.
5. “shares” means shares or any other instrument convertible into shares, of a company listed or proposed to be listed on a recognized stock exchange.
6. ‘substantial transactions” means transactions of at least 5,000 shares or shares of a value of at least Rs. 1, 00,000.
7. “WTM” means a Whole Time Member of the Board and includes the Chairman of the Board.
2. Words and expressions used and not defined in this Code but defined in the securities laws shall have the meanings respectively assigned to them in those laws.
Code in addition to other provisions
3. This Code shall be in addition to the provisions of Section 7 A of the SEBI Act, 1992 Rule 3 (1) and 19 A (1) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992, and Regulations 9 and 11 of the SEBI (Procedure for Board Meetings) Regulations, 2001.
General principles
4. (1) A Member shall take all steps necessary to ensure that any conflict of interests to which he may be subject to does not affect any decision of the Board.
(2) A Member shall disclose his interests which may conflict with his duties.
(3) A Member shall not exploit to his personal advantage, any personal or professional relationship with regulated entities or any employee of such entities.
Outside or private activities
5. (1) A WTM shall not hold any other office of profit.
(2) A WTM shall not engage in any other professional activity, which entails receipt of salary or professional fees.
Transactions in shares
6. (1) A Member shall disclose his holding of shares and holdings of shares of his
family within 15 days of the assumption of Office.
(2) A Member shall disclose his holding of shares and holdings of shares of his family at the end of each financial year within 15 days of the close of the financial year.
(3) A WTM shall disclose substantial transactions by him and his family within 15 days of such transaction.
(4) A Member shall not deal in securities of a company listed on a recognized stock exchange based on unpublished price sensitive information which he may have got access to.
1[Provided that a Member nominated by Government of India or Reserve Bank of India, is exempted from filing the disclosures under this clause if similar disclosure are being made by such Member to the parent organization as per their code of conduct or service regulations and confirmation to this effect is submitted.]
Conflict in respect of agenda
7. (1) A Member, who is directly or indirectly interested in any matter coming up for consideration at a meeting of the Board, shall disclose the nature of his interest at such meeting.
(2) A Member shall not take part in any deliberation or discussion of the Board with respect to such matter except to the extent of professional advice if sought by the Board.
Members not to hear or decide in certain cases
8. No Member shall hear or decide any matter where he has a conflict of interest.
Availing services of intermediaries
9. A Member shall disclose if he or his family has any dispute in respect of product or services availed from an intermediary.
Acceptance of gifts
10. (1) A WTM shall not accept any gift by whatever name called, to the extent possible, from a regulated entity.
(2) A WTM shall hand over the gift, if he receives any and the value exceeds Rs.1000/-, to the General Services Department of the SEBI.
Other disclosures
11. A Member shall disclose the following:
a. any post, other employment or fiduciary position which a Member holds, or has held in the past 5 years in connection with any regulated entity;
b. any other significant relationship, including a professional, personal, financial or family relationship held in connection with a regulated entity;
c. any honorary position, by whatever name called, in any organisation.
2[Provided that a Member nominated by Government of India or Reserve Bank of India, is exempted from filing the disclosures under this clause if similar disclosure are being made by such Member to the parent organization as per their code of conduct or service regulations and confirmation to this effect is submitted.]
Procedure for managing the conflict
12. (1) A Member shall disclose a conflict of interests at the earliest possible opportunity.
(2) A Member shall seek determination from the Chairman if he has a doubt whether there is a conflict of interests or not.
(3) Chairman shall seek determination from the Board if he has a doubt whether there is a conflict of interests or not.
(4) If the Chairman or the Board, as the case may be, determines that there is a conflict of interests, the Member or Chairman shall refrain from dealing with the particular matter.
(5) The Chairman or the Board, as the case may be, shall assign that matter to another Member or a Committee of Members.
Procedure for public to raise conflict of interests
13. (1) Any person, who has reasonable ground to believe that a Member has an
interest in a particular matter, may bring the same with material evidence to the notice of Secretary to Board.
(2) The Secretary to the Board shall place the details received under sub-clause (1) before Chairman in case of a Member and before the Board in case of Chairman.
(3) The Chairman or the Board, as the case may be, shall determine if the Member or Chairman has an interest which is likely to affect the decision by him.
(4) The Member or the Chairman, as the case may be, shall refrain from dealing with that particular matter if the Chairman or the Board determines that there is a conflict of interests.
(5) The Chairman or the Board, as the case may be, shall assign that matter to another Member or a Committee of Members.
Maintenance of disclosures
14. (1) The information as disclosed under this Code shall be kept confidential and shall not be disclosed save in the following circumstances:
a. where there is a requirement for disclosure for the purposes of managing potential or actual conflicts;
b. where there is a requirement for disclosure following the change of responsibilities of a Member;
c. where there is a requirement for the purposes of disciplinary proceedings;
d. where there is any legal or regulatory obligation to disclose the information.
(2) The disclosures by a Member may be scrutinized under the authority of the Chairman with due regard to Members’ areas of responsibility.
(3) The disclosures by Chairman may be scrutinized under the authority of the Board with due regard to Chairman’s responsibility.
(4) The Secretary nominated under Regulation 12(1) of the SEBI (Procedure for Board Meetings) Regulations, 2001 shall keep and maintain custody of documents / records etc. pertaining to any disclosure made by Members under this Code.
Transitory provisions
15. The existing Members shall make the disclosure as required under this Code within a period of one month from the date on which this Code was adopted by the Board.
Annexure II
Extracts of:
Section 7A of SEBI Act – Member not to participate in meetings in certain cases
Any member, who is a director of a company and who as such director has any direct or indirect pecuniary interest in any matter coming up for consideration at a meeting of the Board, shall, as soon as possible after relevant circumstances have come to his knowledge, disclose the nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of the Board, and the member shall not take any part in any deliberation or decision of the Board with respect to that matter.
Regulation 9 of SEBI (Procedure for Board Meetings) Regulations, 2001 – Member not to participate in meetings in certain cases
Every member, who is directly or indirectly concerned or interested in any matter coming up for consideration at a meeting of the Board, shall, as soon as possible, after the relevant circumstances have come to his knowledge, disclose the nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of the Board and the member shall not take any part in any deliberation or decision of the Board with respect to that matter.
Explanation: The expression “directly or indirectly” referred to in this regulation shall include any concern or interest of a member either by himself or through his relatives within the meaning of definition of Section 6 of the Companies Act, 1956 (1 of 1956) or by reason of being a partner, director of that concern
Regulation 11 of SEBI (Procedure for Board Meetings) Regulations, 2001 – Declaration of fidelity
Every member, before entering upon his duties, shall sign a declaration of fidelity and secrecy in the form set out in the Schedule-II pledging himself to observe strict secrecy in relation to all transactions of the Board and all matters relating thereto and shall be by declaration pledge himself not to reveal any of the matters/information which may come to his knowledge in the discharge of his duties except when required or authorised to do so by the Board or by Law.
Rule 3(1) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992 – Terms and Conditions of Service of Chairman and Members
The Chairman or the whole-time Member shall be a person who does not, and will not, have any such financial or other interests as are likely to affect prejudicially his functions as such Chairman or Member.
Rule 19A (1) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992 – Terms and Conditions of Services of Part-time Members
A part-time Member shall be a person who does not, and will not, have any such financial or other interest as is likely to affect prejudicially his functions as a part-time Member.
Rule 3(4) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992
The Chairman or whole time Member shall not accept any employment before the expiry of a period of one year from the date of demitting the office in the Securities and Exchange Board of India, except with the previous sanction of the Central Government.
Notes:
1 inserted w.e.f. May 31, 2023
2 inserted w.e.f. May 31, 2023
