SEBI revamps conflict of interest framework for top officials , enhances ease of doing business | Mumbai News
4 min readMar 24, 2026 02:46 PM IST
The Securities and Exchange Board of India (SEBI) on Monday approved a host of measures at its board meeting, including overhauling the conflict-of-interest guidelines for the chairman and whole-time members as recommended by the high-level committee (HLC) set up by the regulator in March 2025. The regulator also approved many measures promoting ease of doing business for market participants, including allowing foreign portfolio investors (FPIs) to settle cash market transactions on a net basis.
The SEBI board approved the HLC’s recommendations to create uniformity in investments and trading for both employees and higher officials such as the chairman and Whole-Time Members (WTM). These reforms come after the market regulator fell under scrutiny when US-based short selling and research firm Hindenburg Research had accused then SEBI chairperson Madhabi Puri Buch of conflict of interest, linking her and her immediate family to undisclosed stakes in a few Adani group companies. SEBI had then set up this HLC to review the framework regarding the conflict-of-interest framework.
All of its employees, including WTMs and the chairman, will be restricted from trading in equity and equity-related instruments, with only mutual fund holdings permitted. New investments in any pooled financial vehicle will be only permitted if the scheme is managed by a regulated market intermediary, SEBI Chairman Tuhin Kanta Pandey said after the board meeting.
Thus, people joining the regulator as the chairman or WTMs are now either required to liquidate or freeze their investments in equity-related instruments and commercial ventures, including in unlisted companies. These restrictions are also applicable to the family members of SEBI employees, except for the curbs imposed on investments in unlisted securities. As with employees, these higher-level officials have also been brought under the definition of “insider” in case of investments.
The chairman, WTMs, executive directors and chief general managers will have to publicly disclose details of their immovable assets, in-line with norms applicable for Union government civil servants. It will also introduce a digital system and formal recusal to record disclosure of conflicted relationships and track decisions regarding recusals.
FPI norms eased
The SEBI board approved a proposal to allow FPIs to net-off cash market transactions, provided they are outright. This means FPIs can now net-off either a purchase or sale transactions, but not both. “Since non-outright transactions will continue to be confirmed and settled on a gross basis, concerns relating to potential market influence arising from large FPI positions or speculative trading activity is allayed,” the regulator noted.
The move is expected to reduce the cost of funds for FPIs, particularly on days when the indices are rebalanced (stocks added or omitted), which could lead to monetary loss. Currently, these investors close such cash market transactions on a gross basis, which means they require more finances to complete them.
Other measures
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The board also approved amending the ‘fit and proper’ criteria for acting as market intermediaries. Currently, market intermediaries (such as exchanges, brokers, clearing corporations) are automatically disqualified in case an FIR is filed.
However, a charge sheet or criminal complaint filed by SEBI will now not be ground for automatic disqualification. This change was done to ensure that “only persons with integrity, honesty, ethical behaviour, reputation, fairness, and character operate in the securities market.” The regulator also included conviction for economic offenses as grounds for disqualification to act as an intermediary.
Among other measures, the regulator also eased the process for alternative investment funds for winding down business, reducing the minimum investment value for individual investors investing in social impact funds, and some took some steps to enhance the ease of doing business for infrastructure investment trusts and real estate investment trusts.
