Sebi's new panel to review conflict of interest

First board meeting held by new chairperson Tuhin Kanta Pandey also tweaked FPI disclosure norms, IA and RA fees

  • Published:
  • 25/03/2025 02:21 PM

Chairman of Securities and Exchange Board of India (SEBI) Tuhin Kanta Pandey Image: Hemanshi Kamani / Reuters

Green shoots of change are, perhaps, already visible at India’s capital market regulator under the new leadership of Tuhin Kanta Pandey. The Securities and Exchange Board of India (Sebi) is preparing to make significant changes in its code of disclosure norms and conflict-of-interest related matters for its own members and officials on the board, a first of its kind in 17 years. The decision was taken in Pandey’s first board meeting on March 24, after he took charge as chairman in the beginning of the month. The Sebi board will soon constitute a high-level committee (HLC) to review and make recommendations for enhancing the existing framework for managing conflicts of interest, disclosures and related matters. 

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Sebi’s decision comes after the market regulator came under severe scrutiny during the tenure of previous chairperson Madhabi Puri Buch in matters of conflicts of interest related to the allegations levelled by US-based Hindenburg Research against the Adani group. Sebi adopted its code regarding conflicts of interest for board members in 2008 to ensure that it “conducts in a manner that does not compromise its ability to accomplish its mandate or undermine the public confidence in the ability of member to discharge his responsibilities”. 

Pandey appears focussed on Sebi’s transparency and governance norms while ensuring “ease of compliance” and “ease of doing business”.  "Trust is needed to be built," he said, while talking to media.  “There were concerns around trust. There is no tendency to hide. It is just that we need a framework, on how one can complain, how it is looked at, and what the best practices are.” Details of the scope of work, constituent members and when the HLC will be formed are awaited. 

“The HLC is expected to submit its recommendations within three months from the date of constitution, which shall be placed before the board for consideration,” Sebi said in a statement to the press.  According to the board meeting decision, eminent persons and experts with relevant background and experience in constitutional, statutory, regulatory bodies, government, public sector, private sector and academia will be part of the HLC. 

At the meeting, Sebi also took a few other decisions related to disclosures and advance fees charged by investment advisers (IA) and research analysts (RA). It made a few changes in the appointment of public interest directors, cooling-off periods of key management personnel (KMP) and directors, and appointment processes for specific KMPs in market infrastructure institutions (MIIs).

Also read: Madhabi Puri Buch: A tightrope walk of regulation, reform and innovation

Changes in FPI disclosure norms

The board approved a proposal to increase the applicable threshold of FPIs to Rs 50,000 crore from the present Rs 25,000 crore. FPIs holding more than Rs 50,000 crore of equity asset under management (AUM) in the Indian markets will now be required to make additional disclosures. Sebi said this change was made as cash equity market trading volumes have more than doubled between FY22-23 (when these limits were set) and FY24-25. A Sebi circular on August 24, 2023 mandated FPIs (individually or as an investor group), holding more than Rs 25,000 crore of equity AUM in Indian markets to disclose details of all entities (up to the level of natural person) holding any ownership, economic interest, or control, on a full look through basis, without any thresholds. 

All FPIs are required to ensure compliance with norms under the Prevention of Money Laundering Act (PMLA) and Prevention of Money Laundering (Maintenance of Records) Rules (PMLR). 

Advance fees charged by IA and RA

The Sebi board has decided that if a client agrees then IAs and RAs may charge fees in advance up to a period of one year. Earlier, IAs and RAs were allowed to charge advance fee for a maximum period of two quarters and one quarter respectively.

The market regulator adds that such fees are related only to fee limit, modes of payment of fees, refund of fees, advance fee, breakage fees only in case of individual and HUF clients and not being accredited investors.  “These conditions do not apply to non-individual clients, accredited investors, and in case of institutional investors seeking recommendation of proxy adviser. In such cases, fee related terms and conditions shall be governed through bilaterally negotiated contractual terms,” it said.

Last Updated :

March 26, 25 09:47:34 AM IST