India’s premier market regulator, SEBI, has unveiled a detailed conflict‑of‑interest policy that applies to its employees, board members and senior officials. The overhaul follows a review triggered by the controversy surrounding former chairperson Madhabi Puri Buch, who was accused by the now‑defunct Hindenburg Research of conflicts of interest – allegations later dismissed by the nation’s anti‑corruption body.

Background and Regulatory Response

Although Buch was cleared, the episode highlighted gaps in SEBI’s internal safeguards. In response, the board approved a revised framework last month that mandates voluntary adoption of a tighter code of conduct for senior officials and introduces new disclosure and cooling‑off provisions.

Key Provisions of the New Rules

Under the new norms, any employee who retires, resigns or leaves SEBI for any reason cannot appear before or against the regulator on behalf of any party for two years – covering quasi‑judicial proceedings, adjudication, settlements and approvals. Moreover, during their tenure, neither the employee nor their immediate family may make fresh investments in “non‑permitted” assets such as equity shares, equity‑convertible instruments and equity or commodity derivatives.

Scope of Investment Restrictions

Investments through professionally managed pooled vehicles regulated by financial authorities, as well as stakes in InvITs and REITs, remain permissible. However, an employee’s exposure to any SEBI‑regulated pooled vehicle cannot exceed 25 % of their total financial investments. Existing non‑permitted holdings must be sold, frozen, or disposed of under a trading plan approved by the Office of Ethics and Compliance (OEC).

Disclosure, Recusal and Enforcement

If an employee and their family collectively hold non‑permitted assets worth more than ₹20 lakh (or more than 5 % of the employee’s total portfolio), a material interest is deemed to exist. In such cases, the employee must recuse themselves and immediately notify the OEC. SEBI will launch a digital system to log all conflict disclosures and manage recusals. Gifts exceeding ₹50,000 must also be reported, raising the previous threshold of ₹10,000.

Implications for Market Integrity

The tightened regime is expected to reinforce market confidence by curbing potential bias and insider advantages. Yet, the true test will be the regulator’s ability to enforce these standards consistently. Market participants will need to realign their investment strategies to comply with the new family‑wide restrictions, potentially reshaping capital flows in India’s equity markets.