Key Takeaways
- SEBI committee proposes expanded family definition and stricter disclosure rules
- New investment restrictions for board members and senior officials
- Office of Ethics and Compliance to oversee conflict management framework
A high-level SEBI committee has recommended sweeping changes to conflict of interest regulations, including broader family definitions, enhanced disclosures, and investment restrictions for board members. The proposals aim to strengthen governance standards at India’s markets regulator.
Expanded Family Definition
The committee significantly widened the definition of family beyond the 2008 guidelines that covered only spouse and children. The new framework includes “any person for whom the member/employee serves as a legal guardian and any other person related by blood or marriage to the employee or spouse and substantially dependent on such employee.”
The definition of ‘relative’ will now align with the Companies Act, 2013, covering parents, spouse, children and their spouses, and siblings. However, investment restrictions will apply only to family members as defined in the new framework.
Enhanced Disclosure Framework
The committee recommended multiple disclosure levels including initial, annual, event-based, and exit disclosures of assets, liabilities, trading activities, and family relationships. These disclosures will be made to the proposed Office of Ethics and Compliance (OEC) and Oversight Committee on Ethics and Compliance (OCEC).
Chairperson, whole time members, executive directors, and chief general managers must disclose assets and liabilities, while other employees make internal disclosures. Part-time members are exempt from disclosure norms as they’re not involved in SEBI’s day-to-day activities.
Investment Restrictions and Recusal Framework
The chairperson and whole time members can invest in mutual funds and similar products, but these cannot exceed one-fourth of their portfolios. For lateral entries, they must disclose “actual, potential, and perceived conflicts.”
The committee also proposed a robust recusal framework with the chief compliance officer as nodal officer. Summary of recusals will be mentioned in annual reports, ensuring transparency in conflict management.
