Sebi to Tighten Conflict-of-Interest and Insider Trading Norms for Top Officials
A high-level committee established to review conflict-of-interest rules and disclosure norms for top officials at the Securities and Exchange Board of India (Sebi) has put forth significant proposals aimed at enhancing transparency and accountability. Notably, this committee recommends that the chairman and whole-time members be classified as ‘insiders’ under insider trading regulations.
Key Recommendations from the Committee
– Classifying Insiders: The panel, led by former chief vigilance commissioner Pratyush Sinha, suggests that the chairman and whole-time members be treated similarly to employees concerning insider trading rules. This classification aims to prevent unauthorized trading based on unpublished price-sensitive information (UPSI).
– Background of the Review: This initiative arises following serious allegations against the former chairperson, Madhabi Puri Buch, related to conflicts of interest during her tenure.
– Global Standards: If enacted, these changes would align Sebi’s practices with those of international counterparts like the US Securities and Exchange Commission, which mandates annual financial disclosures from its senior officials.
– Disclosure Mechanisms: The report urges all board members and employees to disclose assets, liabilities, trading activities, and potential conflicts, specifically to Sebi’s proposed Office of Ethics and Compliance.
– Whistleblower System: Establishing an anonymous system for reporting conflicts of interest by both employees and external stakeholders is also recommended.
– Investment Restrictions: The panel advises that equity investments in commercial ventures be liquidated or frozen during the tenure of the chairman and whole-time members, disallowing any transactions in these investments.
In conclusion, the committee’s recommendations highlight the importance of rigorous conflict-of-interest norms as a foundational element for regulators. Adhering to higher standards not only enhances trust but also fortifies the integrity of the regulatory framework. The Sebi board will review these proposals before making any official decisions, as transparency and ethical governance remain paramount.