SEBI's new code of conduct to tackle conflict of interest: What changes for board members?

The Securities and Exchange Board of India (SEBI) on Wednesday released a Code of Conduct for its board members, codifying rules on investments, conflict of interest, disclosures, recusals, gifts and post-retirement employment.

The 17-page Code of Conduct, adopted by the SEBI Board at its meeting on June 19, 2026, lays down detailed rules for whole-time members (WTMs), including the chairperson, and part-time members (PTMs), to avoid conflicts of interest and ensure impartial decision-making.

Why has SEBI introduced the code?

The move follows heightened public scrutiny over governance standards at SEBI after its former chief Madhabi Puri Buch faced allegations of conflict of interest, which she has rejected as false and defamatory.

The code says it has been adopted to ensure board members conduct themselves in a manner that does not compromise SEBI's ability to perform its statutory functions and to enhance public confidence in the fairness and transparency of its decisions.

It creates a formal framework for identifying and managing conflicts of interest and prescribes disclosure obligations and restrictions on investments.

What are the new restrictions on investments?

WTMs and their family members will not be allowed to make fresh investments in equities, equity-linked instruments or equity and commodity derivatives during their tenure.

Members joining SEBI with existing equity holdings will have four options. They can liquidate those investments, freeze them until the end of their tenure, sell them through a pre-disclosed trading plan under insider trading regulations, or sell them with prior approval.

Equity holdings in their own commercial ventures can only be sold or frozen. If such investments are not liquidated at the time of joining, the member shall not be allowed to exercise voting rights attached to those shares during the tenure with the Board.

However, investments through professionally managed pooled investment vehicles like mutual funds, as well as investments in REITs and InvITs, are allowed.

The code introduces a detailed recusal framework requiring members to step aside from discussions, decisions and access to information in matters involving conflicted relationships.

The code also places a cap on investments made by WTMs in products offered by any one SEBI-regulated entity managing pooled investment vehicles. Such exposure cannot exceed 25% of the total acquisition cost of all their financial investments.

WTMs will also be required to disclose details of family members, relatives, professional interests over the previous three years, immovable properties, financial investments, liabilities and rental contracts.

What family members can and cannot do

Family members of WTM are allowed to hold the non-permitted investments held by them before the member joined the SEBI and are also allowed to sell those investments during the member's tenure.

However, they are generally prohibited from making fresh investments in equities and derivatives.

The restriction won’t be applicable to employee stock options received as part of a spouse's compensation, investments managed under discretionary portfolio management services where the fund manager acts independently, and investments in unlisted companies as part of a family member's private business or investment activities.

Extensive disclosure requirements

The code requires whole-time members to make detailed disclosures regarding their family members, relatives, professional interests over the previous three years, immovable property, financial investments, liabilities, certain investments held by family members and rental agreements relating to immovable property.

Changes in family relationships, property transactions and rental contracts must also be reported within one month.

The disclosures should be made when they join SEBI, annually and again when they leave office.

Whole-time members will have to additionally disclose financial transactions undertaken by themselves or certain family members if the value exceeds twice their monthly basic pay.

Part-time members, on the other hand, face comparatively lighter disclosure requirements.

Government and statutory organisation representatives will be exempt from filing property and financial investment disclosures with SEBI if they already submit such information to their parent organisations.

Conflict-of-interest and recusal rules

The code establishes detailed recusal provisions requiring members to step aside from matters where a conflict exists.

A member must recuse if the matter involves an entity where a family member or relative is employed in senior management; where the member has a professional or relational interest that may create actual or perceived bias; where a close friend or associate is involved; or where the member has a material financial interest.

Such members will have to step aside from discussions, decisions and access to information in matters involving conflicted relationships.

Can the public raise conflict-of-interest complaints?

Yes. The framework allows any person to approach SEBI's Office of Ethics and Compliance if they have reasonable grounds, supported by evidence, to believe a board member has a conflict of interest in a particular matter.

The OEC will examine the complaint, seek the member's explanation and, if necessary, refer the matter to the Chairperson or the Board for a final determination.

If a conflict is established, the concerned member must recuse from the matter.

Insider trading restrictions

The code explicitly states that every whole-time member will be deemed an insider under SEBI's Insider Trading Regulations and must comply with all restrictions under those regulations.

Rules on gifts

Whole-time members cannot solicit or accept gifts from people with whom they have official dealings or from subordinate employees.

The restriction also extends to gifts accepted by family members on their behalf.

The definition of gifts includes free transport, accommodation and other pecuniary advantages but excludes token items such as mementos, bouquets, diaries and calendars.

Members may accept gifts from personal friends during occasions such as weddings or religious functions, but gifts exceeding ₹50,000 from any one person must be reported to the Office of Ethics and Compliance.

Post-retirement restrictions

The code reiterates existing post-retirement employment restrictions applicable under SEBI service rules. It also requires whole-time members to disclose negotiations for future employment within one month.

After leaving office, former whole-time members cannot appear before or against SEBI on behalf of any person in quasi-judicial proceedings, settlement proceedings or approval matters for two years from the date they are relieved from the regulator.