The Securities and Exchange Board of India’s (Sebi) decision to implement most of the recommendations of the high-level committee (HLC) on conflicts of interest marks a clear improvement over its 2008 framework. It signals a long-overdue recognition that the credibility of a market regulator rests not just on enforcement, but on the integrity it is seen to uphold.
Yet, an obvious question remains: Has Sebi gone far enough? The push for reform is rooted in recent controversy. Allegations of conflict of interest involving former Chairperson Madhabi Puri Buch—flagged by Hindenburg Research—brought uncomfortable scrutiny to the regulator’s internal safeguards. Regardless of the merits of those claims, they exposed a perception gap that Sebi could ill afford. The HLC, set up in March 2025, was therefore as much about restoring institutional credibility as it was about tightening compliance norms.
Closing the Perception Gap
The new framework addresses two essential principles—entering office with clean books and remaining conflict-free during tenure. The requirement for the chairman and whole-time members to liquidate or freeze equity holdings, limits on fresh investments, and the extension of disclosure norms to spouses and dependent family members are all steps in the right direction. The formalisation of recusal processes and the introduction of structured, periodic disclosures further strengthen the system. These measures bring Sebi closer to global best practices.
For example, the chairman and other employees of the US Securities and Exchange Commission are prohibited from holding or trading securities of entities they directly regulate, such as broker-dealers or investment advisers. In fact, they are also banned from investing in financial industry sector funds to further minimise conflict risks. By comparison, Sebi’s updated framework reflects a more robust, if still evolving, approach to managing conflicts.
Transparency Paradox
However, regulation at this level is as much about perception as it is about process. And here, Sebi appears to have settled for a compromise. The decision to publicly disclose only immovable assets, while keeping full details of assets and liabilities confined to internal scrutiny, attempts to balance transparency with privacy. But this calibrated approach risks falling short of public expectations. Sebi officials exercise quasi-judicial powers, with the authority to pass orders that can significantly impact companies, intermediaries and investors. In such a role, higher standards of disclosure are not optional—they are integral to maintaining trust. Partial transparency, even if well-intentioned, leaves room for doubt and undermines the objective of reinforcing credibility.
There is also the question of implementation. Key provisions relating to the chairman and whole-time members still require approval from the central government. Until these are formally notified, a crucial part of the framework remains uncertain. The effectiveness of the reforms will ultimately depend on whether these provisions are adopted in full, without dilution. To its credit, Sebi has finally acknowledged the need for a structural reset after nearly two decades of intermittent controversy. The creation of an ethics and compliance framework, along with tighter disclosure and investment norms, reflects a more institutional approach to managing conflicts of interest.
But reform cannot be episodic. As Sebi Chairman Tuhin Kanta Pandey observed, “spring cleaning has to be done from time to time.” The real challenge is to ensure that this is not seen as a one-off response to controversy, but as the beginning of a sustained commitment to transparency and accountability. For a regulator that anchors trust in India’s capital markets, the bar cannot be anything less.