The Securities and Exchange Board of India
(SEBI) has notified a comprehensive code of conduct for its members, introducing a formal framework to manage conflicts of interest, strengthen governance standards and enhance transparency in the functioning of the market regulator.
The new framework, approved by the SEBI board in June 2026, lays down detailed rules on recusals, disclosures, investments, asset declarations and ethics oversight for the chairperson, whole-time members (WTMs), part-time members (PTMs) and senior officials. The changes also amend the SEBI Employees' Service Regulations and are based on the recommendations of a high-level committee constituted to review the regulator's conflict-of-interest framework.
The revised code aims to reinforce public confidence in SEBI by ensuring that regulatory decisions remain free from personal, financial or professional influence. It comes amid increasing emphasis on institutional accountability and governance standards for market regulators.
Mandatory Recusal in Conflict Situations
A key feature of the framework is the introduction of a structured recusal mechanism requiring members to withdraw from matters where their impartiality may reasonably be questioned.
Under the code, a member must not participate in any proceeding involving an entity with which the member has a conflict arising from family relationships, relatives, close personal associations, recent professional engagements or significant financial interests. Members are also expected to recuse themselves whenever circumstances could create a reasonable perception of bias or affect independent decision-making.
The framework defines 'material financial interest' through specified thresholds, ensuring that significant investments capable of influencing decision-making are disclosed and managed appropriately. The regulator has also provided procedures for recording recusals and for dealing with conflicts that arise after a matter has already been assigned.
Office of Ethics Counsel to Oversee Implementation
To administer the new framework, SEBI has created an office of ethics counsel (OEC), which will maintain records of disclosures, examine conflict-of-interest issues, advise members on ethical matters and monitor compliance with the code.
OEC has also been empowered to receive complaints regarding potential conflicts involving members and senior officials. Where interpretation of any provision becomes necessary, the office may issue clarifications with the approval of the Chairperson.
Extensive Disclosure Obligations
The code significantly expands disclosure requirements for WTMs. SEBI WTMs will have to periodically disclose details relating to their immediate family and relatives, professional engagements during the preceding three years, immovable properties, financial investments, liabilities, rental arrangements involving immovable property and specified financial transactions undertaken during their tenure. The disclosure framework also extends to investments held by family members where the member has an interest.
The prescribed disclosure formats require information on land and buildings, equity holdings, fixed deposits, securities, liabilities above prescribed thresholds, rental agreements, property transactions and significant financial transactions executed during service.
The code also contains specific provisions governing investments that are ordinarily not permitted, while identifying limited circumstances in which exemptions may apply. Detailed disclosures are required whenever such investments are held by family members or acquired under permitted exceptions.
Separate Norms for Part-time Members (PTMs)
Part-time members are also subject to disclosure requirements, although these differ from those applicable to full-time members.
Ex-officio part-time members must certify that they have complied with disclosure requirements applicable under their parent organisations. Other part-time members are required to disclose family details, equity and derivative investments, professional interests before joining the board and any new professional engagements undertaken during their tenure.
Digital Conflict Registry and Annual Reporting
SEBI said it will maintain a digital repository of conflicts of interest and recusals under the new framework.
To improve transparency, the regulator will publish aggregate recusal data every year through its annual report. The disclosure will include the number of recusals involving the chairperson, WTMs, PTMs, executive directors (EDs) and chief general managers (CGMs), without compromising confidential information relating to specific cases.
Strengthening Institutional Governance
The new code follows the SEBI board's approval in June 2026 of a revised governance framework after reviewing existing conflict-of-interest norms and disclosure practices.
According to SEBI, the revised framework is intended to improve institutional integrity by strengthening ethical standards, increasing accountability and ensuring greater transparency in regulatory decision-making. The recommendations were prepared by a high-level committee that examined global governance practices and suggested measures to reinforce confidence in the functioning of the securities market regulator.
The notification represents one of the most significant overhauls of SEBI's internal governance framework in recent years, establishing formal procedures for identifying, managing and publicly reporting conflicts of interest while introducing more comprehensive disclosure obligations for its leadership and senior officials.
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