The Securities and Exchange Board of India (SEBI) has initiated a sweeping review of its conflict-of-interest framework, tasking a high-level committee (HLC) led by former Chief Vigilance Commissioner Pratyush Sinha with modernizing disclosure norms and redefining the scope of “family” for board members. The move, aimed at aligning India’s regulations with global standards, seeks to address gaps exposed by evolving market dynamics, technological advancements, and recent controversies, including the Adani Group probe.
Outdated Norms Meet Modern Challenges
SEBI’s current conflict-of-interest code, drafted in 2008, defines “family” narrowly as a spouse and dependent children under 18—a definition critics argue ignores India’s socio-cultural realities, where extended families often share financial ties. Disclosures under this code remain confidential unless exceptional circumstances arise, a practice the committee deems inadequate in today’s transparency-driven environment.
“The 2008 framework was designed for a different era,” said a source close to the HLC. “Today, complex family structures, digital asset holdings, and social media disclosures require a more nuanced approach.” The committee, formed on April 9, will submit recommendations by July 9, focusing on three pillars:
- Expanding the definition of “family” to include parents, siblings, and financially interdependent relatives.
- Mandating periodic public disclosures of assets, investments, and liabilities, moving beyond the current “one-time” confidential model.
- Creating a grievance mechanism for public complaints and a centralized database to track recusals.
Global Benchmarks and the Adani Catalyst
The HLC’s mandate includes studying regulations in markets like the U.S., EU, and Singapore, where definitions of “family” often encompass domestic partners, adult children, and trusts. For instance, the U.S. SEC requires officials to disclose holdings of spouses, children under 21, and entities they control. The EU’s MiFID II framework mandates real-time updates of financial interests.
“A clear framework is essential. If someone recuses themselves, there should be a system to monitor compliance,” Pandey told Financial Express last month. His remarks underscore SEBI’s bid to restore investor confidence amid rising retail participation—India’s mutual fund industry now boasts over 100 million SIP accounts.
Operational Hurdles and Cultural Nuances
Redefining “family” poses unique challenges in India, where joint families and informal financial dependencies are common. The committee must balance inclusivity with practicality—overly broad definitions could burden officials with excessive disclosure requirements.
Similarly, shifting to public disclosures risks privacy concerns. SEBI may adopt a tiered approach, where sensitive details remain confidential but summaries are published. The HLC is also exploring blockchain-based systems for real-time tracking of disclosures, a model piloted by Dubai’s financial regulator.
Market Implications and Stakeholder Reactions
The reforms could reshape governance for SEBI’s 20-member board, which includes government nominees, RBI representatives, and independent experts. Stricter norms may deter conflicts but could also dissuade qualified candidates from joining regulatory bodies.
Market participants have welcomed the move. “Transparency is non-negotiable in today’s interconnected markets,” said Nilesh Shah of Kotak Mahindra AMC. However, some industry veterans caution against overregulation. “SEBI must avoid creating a compliance labyrinth,” argued former SEBI member J.N. Gupta.
The Adani Group, meanwhile, continues to navigate legal headwinds. On Monday, Adani Ports shares surged 5% as company lawyers sought dismissal of charges against Gautam Adani in a separate securities case.
The Road Ahead
With three months to finalize its report, the Sinha-led committee faces a tight deadline. Recommendations will undergo board review before implementation, likely by early 2026. Success hinges on striking a balance between global rigor and local pragmatism—a task complicated by India’s unique family structures and digital leapfrogging.
More Links:
