SEBI Proposes Stricter Governance Standards with New Ethics Framework

The high-level committee formed by SEBI recommends a significant revision of its ethics and conflict-of-interest framework to bolster transparency and governance. Key proposals include implementing a legally enforceable code, creating an Office of Ethics and Compliance, and adopting international regulatory practices to enhance SEBI's reputation and accountability.

A high-level committee established by the Securities and Exchange Board of India (SEBI) has proposed a comprehensive reform of the market regulator's ethics and conflict-of-interest protocols. Chaired by former Chief Vigilance Commissioner Pratyush Sinha, the committee aims to shift from a voluntary code to a legally enforced framework to enhance SEBI's governance.

The report, released on Wednesday, suggests implementing specific regulations for SEBI Board Members concerning disclosures and conflict-of-interest management, marking a shift from the current voluntary code. Key features of the proposal include clear definitions, robust disclosure guidelines, and the creation of an independent ethics office.

The committee found that SEBI's existing framework lacks adequate enforcement mechanisms and substantive evaluation of disclosures. Proposed changes include establishing a digital registry for conflict-of-interest declarations and forming an Office of Ethics and Compliance, led by a Chief Ethics and Compliance Officer. These bodies will oversee recusals and ethics audits, addressing gaps in the current system.

(With inputs from agencies.)