Market regulator Sebi has revamped the code of conduct for its employees, strengthening the internal ethics and conflict-of-interest frameworks, introducing a two-year cooling-off period for them to seek post-retirement/outside Sebi jobs.
The regulator has also set up a dedicated office of ethics and compliance to oversee disclosures, recusals and curbs on their investment plans.
Apart from the cooling-off period, the new code also makes it mandatory for employees to disclose the regulator their negotiations for future jobs, according to the changes notified through the Sebi employees' service amendment regulations, 2026. The code, notified on July 11, are among the most comprehensive reforms to the regulator's employee conduct rules in recent years.
Among the first public statements that Tuhin Kanta Pandey made after assuming office in March 2025 was to set up a high-level committee to set an ethical code of conduct framework for senior Sebi management.
While much of the attention is centred on the Sebi ban on fresh equity investments by its employees, new code also introduces a series of governance measures to safeguard the regulator's independence and address potential conflicts of interest.
One of the key changes is a two-year cooling-off period for new jobs. Under the new rules, employees who retire from/leave Sebi will not be permitted to appear before or against the market regulator on behalf of another person in any matter, including quasi-judicial proceedings, adjudication, settlement proceedings or approval-related matters, for two years from the date of their leaving the Sebi.
Since Sebi officials possess detailed knowledge of internal regulatory processes and enforcement practices, the cooling-off period is intended to reduce the risk of perceived/actual conflicts arising immediately after an employee exits the regulator.
Another notable reform is that Sebi employees will now be required to disclose any negotiations/agreements relating to future employment within a month of doing so, effectively bringing future job negotiations disclosure mandatory, rather than waiting until an employee has formally accepted another job.
The amendments also formally establish an office of ethics and compliance that will become the central authority responsible for administering the new code. This office will receive disclosures relating to employees’ financial interests, approve certain investment transactions, oversee trading plans, examine conflict-of-interest situations and also administer recusal requirements.
The regulation also clarifies that whenever there is a doubt on a matter involving a conflicted relationship, the issue may be referred to the office of ethics and compliance.
The code also introduces a comprehensive recusal framework requiring employees to step aside from matters involving actual or perceived conflicts of interest. Employees must not participate in discussions/decisions or access information relating to cases involving entities/individuals with whom they have a conflicted relationship. Such relations include family members/relatives holding senior positions in an entity, professional/personal relationships that may create bias, close friendships or associations over the past three years, and material financial interests.
The regulator has also wants investments by staff of Rs 20 lakh or more or which account for over 5% of an employee's total financial investments, to make prior disclosures.
The new code also says Sebi to establish a digital system to record disclosures and recusals. The regulations have defined recusal broadly. It includes remaining absent from discussions and decision-making, not accessing confidential information relating to the matter, refraining from participating in discussions and following any additional directions issued by the competent authority.
The notification also revises the Sebi’s gift policy. Employees may continue to receive customary gifts such as mementos, souvenirs, bouquets, diaries, calendars and small boxes of sweets. However, gifts received exceeding Rs 50,000 must now be reported to the competent authority, replacing the earlier reporting threshold of Rs 10,000.
