Editorial. Not above board

When US short-seller Hindenburg Research levelled a battery of allegations against the then SEBI (Securities and Exchange Board of India) chief in 2024, the official pushback was muted and unconvincing. This episode hinted at a lack of regulatory clarity on conflicts of interest issues with regard to top SEBI officials. Therefore, it comes as a relief to see the high-level committee chaired by former Chief Vigilance Commissioner Pratyush Sinha, do a thorough job of reviewing the extant regulatory framework to deal with conflicts of interest for the SEBI Chair and Board members. The Committee has found yawning gaps in the regulations and suggests sweeping changes. One, rules regarding conflicts for SEBI Board members are strewn across several statutes, leading to confusion. Most norms are laid down in the 2008 code of conduct, which lacks legal enforceability. The Committee recommends that all regulations dealing with conflicts of interest be written into a unified law. Two, existing laws do not identify areas where conflicts may arise. The Committee lists out five such areas (financial and non-financial interests, investments, gifts, recusals and post-retirement employment) and suggests remedies. It proposes standardised definitions of terms such as conflicts of interest, family, relative and significant relationships. Three, strangely SEBI employees are subject to much more stringent restrictions on their investing and trading activities than Board members. For instance, employees are automatically treated as ‘insiders’ under securities law and barred from trading, while there are no such restrictions for Board members. The panel seeks to correct this by treating Board members as permanent ‘insiders’ and prohibiting investments or trading by the Chair and Whole-time members (WTMs). Investments by the Chair, WTMs and employees should be only in professionally managed pooled vehicles. To prevent appointments of candidates with vested interests to the posts of SEBI Chair and WTMs, the panel suggests that applicants disclose actual and potential conflicts at the outset. Thereafter, they must make annual and event-based disclosures of assets, liabilities and trading activities. These will be publicly posted for the Chairperson, WTMs, Executive Directors, and Chief General Managers. Such public disclosures may be necessary, but in imposing such conditions further down the line a balance needs to be struck between preventing conflicts and attracting competent professionals who see such requirements as a breach of privacy. To ensure independent oversight, the committee suggests a separate Office of Ethics and Compliance and an Oversight Committee on Ethics and Compliance. It rightly moots a secure anonymous whistleblower system at SEBI. These recommendations need to codified into law without further ado. The government should also consider implementing some of these safeguards for the Reserve Bank of India, IRDAI, PFRDA and Employees Provident Fund Organisation. Published on November 17, 2025