The recent report of the high-level committee, appointed in the backdrop of allegations against Ms Buch, on a Conflict-of-Interest Code for SEBI employees and top management, has generated strong expectations outside SEBI and would have triggered discomfort within. While the stated goal—ensuring decisions are fair and perceived as fair—is unexceptionable, many recommendations appear excessive, intrusive, and misaligned with SEBI’s own regulatory philosophy. When seen alongside SEBI’s weak vigilance culture and inconsistencies in high-profile cases, the proposals look more like image management than genuine reform.
An Overreach in the Name of Transparency: The report proposes extensive disclosures of personal assets and investment restrictions for employees, senior officials, and even financially independent family members. While transparency is important, such requirements raise concerns of proportionality, privacy, and employee safety. Globally, conflict-of-interest frameworks follow the principle of “need-to-know”, requiring internal disclosures limited to interests that can influence decisions. This report, however, demands a lot more information than necessary, even from mid-level officials with no market-moving responsibilities.
More troubling is the extension of obligations to spouses or relatives with independent incomes. This contradicts SEBI’s own insider-trading rules, which restrict disclosures only to dependents. Instead of focusing on areas where conflicts actually arise—at the Board level—the report places the burden disproportionately on employees. The approach risks ensnaring individuals with no professional connection to securities markets. When major decision-making as well as perceived conflict of interest lie at the top management and board level, dragging in mid-level officials, who are all career SEBI employees, only serves to dilute and divert the purpose.
Bureaucratic Expansion Without Purpose: The proposal to create a new ED-level post for ethics oversight raises further concerns. Such a position risks adding another bureaucratic sinecure, with little contribution to market development or investor protection. The performance of existing oversight mechanisms, especially the Chief Vigilance Officer (CVO), hardly inspires confidence. The CVO’s office has rarely taken any meaningful action and, more often than not, appears to shield senior officials from scrutiny rather than investigate allegations. If the CVO cannot oversee SEBI’s chairman and members—whose service conditions are set by the central government—how will a new Chief Ethics Officer do so? Since the government appoints and regulates the tenure of SEBI’s top executives, the conflict-of-interest oversight for board members should come from the government, not SEBI. The same logic applies across regulators, suggesting that a consistent framework should be created by the appointing authority rather than each regulator acting individually.
A Hollow Code Without a Vigilance Foundation: The most fundamental flaw in the proposed code is not its intrusiveness but its irrelevance in the absence of a functioning vigilance system. SEBI’s internal vigilance wing appears dormant, with negligible action even in glaring cases of mishandling or inconsistent regulatory decisions. Shockingly, vigilance efforts are often completely illegally directed at advocates practising before SEBI rather than its own officials. Board members remain outside its purview entirely.
Without genuine internal oversight, the new code risks becoming a symbolic exercise—scrutinising employees’ private lives while ignoring institutional failures. The credibility gap widens when one considers inconsistent or intellectually dishonest regulatory decisions. A notable example is the selective use of data and inconsistent treatment of entities in the NSE colocation case. Skewed or incomplete analysis by the regulator has, at times, triggered undue parallel investigations by the CBI and the ED, prolonging matters and causing hardships to intermediaries.
Given the gaps in SEBI’s internal systems, the code’s focus on personal disclosures seems ironic. A burdensome compliance exercise targeting employees’ private asset details cannot compensate for weak vigilance or questionable decision-making at senior levels. The proposals appear more like a political gesture—an impressive-sounding announcement with limited actual value—rather than a substantive governance reform.
A Better, Balanced Approach: A meaningful conflict-of-interest framework must rest on three principles: proportionality, alignment, and clarity of purpose. It must focus on risks that truly affect regulatory integrity rather than impose sweeping, unnecessary requirements on employees. Since conflict risks exist across all regulators, the framework should be reviewed and standardised by the government, the common appointing authority, rather than left to individual institutions. SEBI must also engage with its employees meaningfully before finalising such a code.
Regulations work when those affected understand and accept their purpose. Employees in SEBI have strong collective voices, and meaningful consultation is essential. Further, given that the SEBI Act empowers only the central government to remove SEBI board members, oversight of their conduct cannot logically be delegated to SEBI or a board committee created by it. A conflict-of-interest mechanism for senior officials must, therefore, be designed by the government and applied uniformly across regulators.
Ultimately, conflict management, ethics, and vigilance converge into a single goal: preventing dishonest, inconsistent, or unethical conduct. Only a strong vigilance culture can uphold this goal. The high-level committee’s report opens an opportunity for reform, but only if SEBI—and the government—focus on the real issues: inconsistent decision-making, an absence of vigilance, and a lack of transparent accountability at senior levels. Without strong institutional oversight, the current proposals risk remaining what many fear they already are—cosmetic optics rather than meaningful reforms.
The writer is a retired IRS officer and Ex-Chief of Surveillance at SEBI. Advisor to corporates, market participants and tech entrepreneurs.
