The High-Level Committee’s conflict-of-interest recommendations for the Securities and Exchange Board of India (SEBI) could materially alter how the regulator hires senior talent, handles daily exposure to sensitive information, and manages post-tenure transitions, raising governance standards but also introducing operational friction.
SEBI’s current regime relies heavily on self-disclosure and trust, creating grey areas and inconsistencies. The new framework shifts toward objective conflict triggers, clearer categorisation of interests and mandatory, better-documented recusal protocols, supported by audit trails and oversight, said lawyers.
Further, giving the conflict-of-interest framework statutory force under the SEBI Act would provide clear obligations, enforceable sanctions and judicially reviewable processes.
Disclosure dilemma
One of the most consequential changes is the proposed public disclosure of assets and liabilities of the Chairperson and Whole-Time Members (WTMs). While intended to harden institutional safeguards, the rule raises questions on privacy and SEBI’s ability to draw experienced professionals from the private sector.
Hardeep Sachdeva, Senior Partner at AZB & Partners, said, “Greater transparency through disclosure of assets and liabilities will certainly strengthen confidence in SEBI, provided it is balanced with appropriate privacy safeguards so that capable professionals are not deterred from taking up senior roles.”
Tushar Kumar, Advocate at the Supreme Court, said the move brings SEBI closer to global best practice. “The publication of financial interests serves as a structural safeguard against allegations of opacity or preferential access…SEBI cannot reasonably operate at a lower threshold than mature jurisdictions,” he said.
Cooling costs
The proposed two-year cooling-off period for former senior officials is expected to restrict them from appearing before or joining entities they once supervised, increasing the cost of re-entering the private sector.
“If interpreted too broadly, covering consulting, advisory, compliance, fintech or global roles, it could become a strong deterrent for professionals considering senior positions at SEBI,” Alay Razvi, Managing Partner, Accord Juris.
But the risk of too-quick transitions remains a legitimate policy concern, said Diviay Chadha, Partner, Singhania & Co. “The restriction prevents immediate transitions to lucrative private-sector roles in regulated entities… and acknowledges that insider knowledge and relationships built during tenure could be improperly leveraged if transitions happen too quickly,” he said.
Insider implications
The daily functioning of the regulator’s top brass could also shift if the Chairperson and WTMs are formally designated as “insiders” under insider-trading rules, as it introduces operational complications if exemptions and scope are not clearly defined.
Razvi said careful drafting is essential. “Insider-trading rules are stringent and event driven. Without clear operational carve-outs, routine regulatory meetings or policy interactions could inadvertently trigger compliance breaches,” he said.
Beyond individual conduct, the HLC has proposed a broader structural redesign, including uniform investment restrictions, continuous disclosures, a dedicated ethics office, a digital conflict-flagging portal, mandatory recusals and a strengthened whistle-blower mechanism.