The Securities and Exchange Board of India (SEBI) has implemented a comprehensive new Code of Conduct for its board members, aiming to strengthen governance and transparency. The 17-page document, adopted on June 19, 2026, outlines strict rules on investments, conflict of interest, disclosures, gifts, recusals, and post-retirement employment for both whole-time and part-time members.
This move comes amid increased public scrutiny following allegations of conflict of interest against SEBI's former chief, Madhabi Puri Buch, which she has denied. The new code is designed to ensure impartial decision-making and maintain public confidence in SEBI's regulatory functions.
Understanding SEBI's Code of Conduct
SEBI’s Code of Conduct sets clear boundaries for board members to avoid situations that could compromise the regulator’s integrity. It applies to whole-time members (WTMs), including the chairperson, and part-time members (PTMs). The code establishes a formal framework to identify and manage conflicts of interest, requiring members to disclose relevant financial holdings, family relationships, and professional interests.
One of the key features is the prohibition on WTMs and their family members from making fresh investments in equities, equity-linked instruments, or derivatives during their tenure. Existing holdings must be either liquidated, frozen, or sold under strict conditions. However, investments in mutual funds, Real Estate Investment Trusts (REITs), and Infrastructure Investment Trusts (InvITs) remain permitted.
Key Provisions and Rules for Board Members
- WTMs cannot invest more than 25% of their total financial investments in products from any single SEBI-regulated entity managing pooled investment vehicles.
- Members must disclose details about family members, relatives, professional interests over the past three years, immovable properties, financial investments, liabilities, and rental contracts.
- Family members may hold pre-existing investments but are generally barred from making new equity or derivative investments during the member’s tenure.
- Members must recuse themselves from discussions or decisions involving conflicts, such as matters related to family members’ employers, close associates, or personal financial interests.
- Gifts from official contacts or subordinates are prohibited, with exceptions for token items and gifts from personal friends during special occasions, subject to reporting requirements for gifts over ₹50,000.
- Post-retirement, former WTMs face a two-year ban on representing clients before SEBI in quasi-judicial or approval matters.
Why SEBI’s New Code Matters for Market Governance
This code aims to enhance the regulator’s credibility by minimizing conflicts that could influence decision-making. By enforcing strict disclosure and recusal rules, SEBI seeks to prevent any perception of bias or undue influence among its board members. The restrictions on investments and gifts further reduce the risk of conflicts arising from financial interests or personal relationships.
Additionally, the code’s detailed post-retirement employment restrictions help prevent revolving-door scenarios where former officials might leverage insider knowledge for private gain. The framework also empowers SEBI’s Office of Ethics and Compliance to investigate complaints about conflicts of interest, ensuring accountability.
Overall, this initiative reflects SEBI’s commitment to upholding high ethical standards and maintaining investor trust in India’s financial markets.
Frequently Asked Questions
Q: Who does the new SEBI Code of Conduct apply to?
A: It applies to all whole-time members, including the chairperson, and part-time members of SEBI’s board.
Q: What investment restrictions are imposed on SEBI board members?
A: Whole-time members and their families cannot make fresh investments in equities, equity-linked instruments, or derivatives during their tenure. Existing holdings must be liquidated, frozen, or sold under specified conditions.
Q: How does the code address conflicts of interest?
A: The code requires members to disclose relevant relationships and financial interests and mandates recusal from any matters where conflicts exist, including those involving family members or close associates.
