Business
Sebi at odds over conflict of interest rules for top brass
The concerns centre on whether Sebi can frame a code of conduct for its chairman and whole-time members, given that their selection is approved by the Appointments Committee of the Cabinet, chaired by the Prime Minister, they said. The issue was discussed at the Sebi board meeting on December 17, after which the proposal was deferred for further deliberation. “At the meeting, board members flagged concerns over parts of the proposal, particularly those relating to prescribing a code of conduct for Sebi officials appointed by the central government,” said one of two people familiar with the discussions. “They felt it would be inappropriate for the Sebi board to frame such rules, given that these appointments are approved by the Centre.”
Agencies Govt Empowered to Make Rules
The capital market regulator didn’t respond to queries. According to former Sebi chairman Ajay Tyagi, the proper legal approach is for the government to frame rules defining the code of conduct for members. “Since these members are appointed by the government, rules should be made by the government for them,” he said. “If they don’t follow the rules, then the government should take action against them as per the provisions under those rules.”
Under the Sebi Act, the government is empowered to make such rules, he said.
“The board adopting a code of conduct for its own members will be self-regulation,” Tyagi said. “But to give it legal sanctity, the government should frame the rules. In fact, the government should make similar rules for other regulators under their respective acts as well.”
A 2024 Hindenburg Research report had raised conflict-of-interest accusations against former Sebi chief Madhabi Puri Buch. In November last year, a six-member panel led by former chief vigilance commissioner Pratyush Sinha recommended an overhaul of Sebi’s disclosure framework.
PRIVACY CONCERNS
Among its key proposals was the public disclosure of assets and liabilities by the Sebi chairman, whole-time members, and officers of chief general manager rank and above.
This recommendation has already run into resistance, particularly from Sebi employees, who have flagged privacy concerns over making personal financial information publicly accessible.
Sebi’s nine-member board comprises whole-time members as well as part-time nominee directors from the Reserve Bank of India (RBI), the finance ministry and the corporate affairs ministry. Nominee members are exempted from making separate disclosures where such requirements are already covered by their parent organisations.
Sebi’s executive members, including the chairman and its employees, currently make internal disclosures of interests that could potentially lead to conflicts. These disclosures do not include declarations of assets and liabilities. The disclosures remain confidential, with records held by the board secretary for members and by the organisation for employees.
