India's Market Regulator Sebi Weighs Transparency Reforms Amid Conflict-of-Interest Concerns

Introduction to Sebi Reforms

The Securities and Exchange Board of India (Sebi) is considering a proposal to improve transparency among its employees. The plan involves publicly disclosing assets and liabilities of senior officials, including the chairman, whole-time members, and officers at the chief general manager level and above.

Background of the Proposal

This proposal was made by a high-level committee in November to address conflict-of-interest allegations involving former Sebi chairperson Madhabi Puri Buch. In August 2024, US-based short-seller Hindenburg Research claimed that Buch and her husband held undisclosed stakes in entities allegedly connected with the Adani Group, which was being investigated by Sebi for potential fraud. Both the Adani Group and the Buchs denied these allegations.

Proposed Reforms

The committee has recommended the most extensive internal clean-up in conflict-of-interest and disclosure rules in years. Key proposals include:

• Senior officials would be required to publicly disclose their assets and liabilities upon assuming office and file these declarations annually.
• All Sebi board members and employees would need to file initial, annual, event-based, and exit disclosures covering their assets, liabilities, securities transactions, family ties, and any professional or personal interests that may create a conflict.
• A newly proposed Office of Ethics and Compliance (OEC) would be established, led by a chief ethics and compliance officer, and monitored by an independent Oversight Committee on Ethics and Compliance (OCEC).

Privacy Concerns and Implementation

Sebi chief Tuhin Kanta Pandey mentioned that while employees are willing to disclose information internally, they have concerns about making it public. The decision on whether to implement this proposal depends on the Sebi board's view. Pandey emphasized that the question is whether such a measure is necessary, especially when it is not widely required in other parts of the country.

The proposed framework also aims to enhance reporting of personal relationships, including disclosing the names and connections of relatives and any other relationships that could give rise to potential conflicts. The definition of family has been broadened to include spouses, dependent children, legal wards, and any individual substantially dependent on the employee.