The Securities and Exchange Board (Sebi) Board, which met here on Monday, approved a revised code of conduct to govern the issues of conflicts of interest for its whole-time members (WTMs) and other senior officials, while referring certain critical provisions to the government for consideration.
The board has also announced a slew of other decisions such as allowing alternative investment funds (AIFs) greater flexibility in exit norms, more freedom to handle residual assets and liabilities after the end of their tenure; permitting net settlement of funds for transactions done by FPIs in cash market and also relaxing investment norms for Invits and Reits.
The code of conduct and stricter disclosure norms for senior Sebi officials comes after recommendations by a high-level committee — one of the first major decisions taken by current chairman Tuhin Kanta Pandey soon after taking over in March 2025 — chaired by former chief vigilance commissioner Pratyush Sinha. The panel had called for a comprehensive, legally enforceable system to replace the regulator’s existing and fragmented code.
The setting up of the panel was necessitated by allegations against the past chair Madhabi Puri Buch of not making adequate disclosures about her income as well as investments as well as that of her husband during and prior to her joining the Sebi as its chairperson.
According to the board’s decision announced by Pandey during a press conference after the board meeting this evening here Monday, key recommendations relating specifically to board members will require government approval. These include the proposal to notify a separate set of regulations governing disclosures and conflict management for board members.
“Since the government is the appointing authority and determines the terms of service of Sebi board, it will take the final call on these measures,” he said.
The board has also referred to the government the recommendation on oversight of conflicts involving board members, including the creation of an oversight committee on ethics and compliance. This body is intended to strengthen independent supervision of disclosures and recusal decisions at the highest level.
At the same time, Sebi will move ahead with internal reforms to operationalise the broader framework, Pandey said, adding these include amendments to the Sebi (employees’ service) regulations, 2001, and a revision of the existing 2008 code on conflict of interest for board members.
Sebi will also put in place systems and processes to implement a comprehensive conflict management mechanism across the organisation, the chairman said.
Amending the AIF regulations, 2012, Sebi allowed AIFs greater flexibility in handling residual assets and liabilities after the end of their tenure and said it “will introduce a new category of “inoperative funds,” which will be subject to lighter compliance requirements until they formally surrender their registration, reducing the regulatory burden during the wind-down phase.
Under the current framework, AIFs are required to distribute all liquidation proceeds to investors and bring their bank balances to zero before surrendering their registration. However, Sebi noted that many funds are unable to meet these conditions due to pending tax disputes, litigation, or residual operational expenses. As a result, such funds are forced to continue holding active registration and comply with ongoing regulatory requirements despite having no active investment operations.