SEBI revamps framework on conflict of interest, enhances ease of doing biz, Pg13

Key Highlights:

• SEBI revamped conflict-of-interest guidelines for chairman and whole-time members based on the HLC's recommendations from March 2025.
• All SEBI employees, including chairman and WTMs, are restricted from trading in equity, with only mutual fund holdings permitted.
• SEBI officials must liquidate or freeze equity investments upon joining, applicable to family members except for unlisted securities.
• FPIs are now allowed to settle cash market transactions on a net basis, reducing costs, especially during index rebalancing.
• The board approved amending the ‘fit and proper’ criteria for market intermediaries.

Detailed Insights:

• The reforms were initiated after concerns arose regarding potential conflict of interest involving the former SEBI Chairperson and stakes in Adani Group firms.
• Higher-level officials are now under the definition of "insider" concerning investments, enhancing accountability and transparency.
• The chair, WTMs, executive directors, and chief general managers must disclose immovable assets, aligning with Union government civil servant norms.
• A digital system will record conflicted relationships and track recusal decisions, promoting transparency and accountability.
• Allowing FPIs to net-off cash market transactions reduces funding costs, particularly during index rebalancing, without enabling speculative trading.
• The amended ‘fit and proper’ criteria for market intermediaries aim to strengthen regulatory oversight and market integrity.

Key Concepts Involved:

• Conflict of Interest: A situation where personal interests could compromise impartial decisions.
• Foreign Portfolio Investor (FPI): An investor investing in financial assets of a country.
• Market Intermediaries: Entities facilitating transactions between buyers and sellers in financial markets.