MUMBAI: The high-level committee (HLC) to comprehensively overhaul the norms governing conflict of interest issues, disclosures pertaining to property, investments, liabilities etc—one of the first measures announced by chairman Tuhin Kanta Pandey soon after taking over the reins of the regulatory body in March, has submitted its report to the Sebi.
Sebi’s existing code on conflict of interest for board members was voluntarily adopted by the board in December 2008, when CB Bhave was the chairman.
And the formation of the HLC in April—taken at the first board meeting of chaired by Pandey—was necessitated by the many allegations that the previous chair Madahbi Puri Buch faced in her dealings with certain companies with which her husband Dhawal Buch had commercial interests, and also couple’s investments in certain entities—none of which were disclosed by her while joining the board as the first woman and also the first from the corporate world to head the Sebi in February 2022.
The HLC is chaired by the retired IAS officer and former CVC Pratyush Sinha with the former MCA secretary and former chairman of the IFSCA Injeti Srinivas as vice-chairman. The members include banker Uday Kotak, a former RBI executive director and a former Sebi whole time member G Mahalingam, Sarit Jafa, a retired IAS, and a former deputy CAG, and Prof R Narayanaswamy, a former professor at IIM Bangalore.
According to the Sebi, the panel submitted the report to the Sebi on Monday.
The terms of reference of the panel were to review the existing policies and frameworks governing conflict of interest, disclosures and related matters and identify any gaps or ambiguities, and also 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. The panel was also tasked with suggesting a mechanism for the public to raise concerns pertaining to conflict of interest and disclosures, including the process to examine complaints.
Though Sebi did not disclose the details of the recommendations of the HLC, sources in the know of the report told TNIE that the panel has made wide-ranging suggestions, including making all disclosures of Sebi board members public instead of leaving it to the board of the regulator, and having an ombudsman-like mechanism, independent from Sebi.
One of the members has suggested that the existing structure of chief vigilance officer at Sebi needs a relook as it may have a conflict.
There is also a suggestion for a complete ban on share trading by Sebi board members and officials.
Other suggestions include a well-laid out norms for recusals, disclosures and investments. Though Sebi’s whole time members recuse themselves from cases where there is likely a conflict of interest, no standard process is defined now. There were allegations of selective recusals and hence the issue was flagged to the HLC.
A Sebi board note on the HLC said the code of conflict of interest is in addition to the provisions of the Sebi Act and other regulations applicable to Sebi board members, including the chairman and officials, like the Sebi (procedure for board meetings) regulations.
Also, the Sebi (terms and conditions of service of chairman and members) rules of 1992, are applicable in dealing with financial and other interests of members which are likely to affect or influence their functions as members.
Sebi officials are also governed by Sebi (employees service) regulations of 2001, which specify the provisions on private trading, restrictions on investments, speculation in stocks, shares, investments, misuse of official position, acceptance of gifts, declaration and approvals relating to movable, immovable and valuable property etc.