SEBI Conflict of Interest Report: A Deep Dive Into What It Means for India’s Markets

Every now and then, a regulatory update comes along that quietly reshapes how our financial system works. The SEBI conflict of interest report, published in November 2025, is one such document. It may not have made headlines like big IPO listings or market rallies, but in terms of long-term impact, it’s one of the most important developments of the year.

I spent a good amount of time reading the entire report — nearly 100 pages — along with the background information on international regulators. As I went through it, I kept thinking about everyday investors who rely on SEBI to keep markets fair. The rules SEBI follows internally are just as important as the rules it makes for companies, brokers, and intermediaries. And this report tries to strengthen the very foundation on which market integrity is built.

So, here’s a detailed, friendly, human-style explanation of everything you need to know.

Why SEBI Needed This Review in the First Place

Let’s start with something simple: trust.

India’s capital markets have grown massively, especially after 2020. Retail participation has exploded, new-age businesses have listed, and global investors are watching India with more interest than ever.

But with growth comes responsibility. For a market regulator, nothing matters more than perception — people must believe that decisions are independent and free from bias. Even a hint of personal interest, favouritism, or conflict can shake confidence.

Over the years, SEBI’s employees and Members followed two sets of rules:

• The SEBI Code on Conflict of Interests for Board Members (2008)
  
• The SEBI (Employees’ Service) Regulations, 2001
  

The problem? These rules didn’t match. Employees had much stricter restrictions, while Members — the people who make some of the most sensitive decisions — had comparatively lighter rules. Some of the definitions were outdated. There was limited monitoring. Public transparency was almost zero.

This imbalance could raise questions, especially in a market growing as fast as ours.

To fix all this, SEBI formed a High-Level Committee (HLC) in March 2025, led by senior bureaucrats, former regulators, industry leaders, and academics.

Their job was clear: dig deep, find the gaps, and propose a new, stronger ethical framework.

What the Committee Reviewed

Before recommending anything, the committee studied:

• SEBI’s existing rules
  
• Practices followed by global regulators like the SEC, FCA, MAS, ASIC, and BaFin
  
• Indian regulators such as RBI, IRDAI, PFRDA, IFSCA
  
• Government conduct rules
  
• Market infrastructure institutions (like stock exchanges)
  
• Public and stakeholder input
  

The comparison with global regulators is crucial. Countries like the US and UK are ruthless when it comes to conflict-of-interest norms. Their transparency standards are extremely high, and disclosures by regulators often sit in the public domain.

SEBI wanted to reach that level of credibility.

What the SEBI Conflict of Interest Report Found

Here’s the heart of the matter: the committee discovered several gaps and inconsistencies in SEBI’s existing internal framework.

1. Different standards for Members and employees

Employees faced tighter restrictions. Members didn’t.

This imbalance was risky.

2. Definitions were inconsistent

Who counts as “family”?
What exactly is a “conflict of interest”?

Even these weren’t defined uniformly.

3. Weak disclosure requirements

Members had minimal disclosure obligations.
Employees, on the other hand, had to declare almost everything.

4. No public transparency

Recusals, disclosures, and conflicts were all confidential.
Nothing was visible to investors.

5. Insufficient monitoring

Disclosure forms were often kept in sealed covers.
No one reviewed them properly.

6. No separate ethics office

Unlike global regulators, SEBI didn’t have a dedicated ethics and compliance department.

7. Trading restrictions didn’t match global standards

Employees had prohibitions on trading in equity.
Members did not.

8. Whistleblower mechanism needed strengthening

There was no structured way for someone to raise conflict-related concerns.

These gaps may not cause daily problems, but over time, they can affect credibility. And in the world of financial regulation, credibility is everything.

Key Recommendations of the SEBI Conflict of Interest Report

The committee proposed a completely revamped system — a modern, transparent, globally-aligned framework.

Here’s everything you should know:

1. A Broader, Modern Definition of Conflict of Interest

The new definition includes:

• Financial conflicts
  
• Professional affiliations
  
• Personal relationships
  
• Fiduciary roles
  
• Duty-related conflicts
  
• Information-based conflicts
  
• Even perceived conflicts
  

This last one is important. In global regimes, perception matters just as much as reality.

2. One Uniform Standard For Everyone — Members and Employees

No more separate rules.
The same ethical duties, the same restrictions.

This significantly reduces the risk of uneven treatment.

3. A Much Stronger Disclosure System

This is one of the most important changes suggested in the SEBI conflict of interest report.

The new regime includes:

• Initial disclosures when someone joins
  
• Annual disclosures of assets, liabilities, relationships
  
• Event-based disclosures for any change
  
• Exit disclosures
  
• Public disclosure of senior officials’ assets
  

For the first time, SEBI may publicly list the assets and liabilities of top decision-makers.

This is similar to the US SEC, where such forms are accessible to the public.

4. Stricter Investment and Trading Restrictions

The report proposes:

• Treating Chairperson/WTMs as “insiders” under insider trading law
  
• Restrictions on equity investments
  
• Restrictions on securities of SEBI-regulated firms
  
• Allowing investments only in pooled, professionally managed vehicles
  

This reduces any chance of misuse of UPSI or biased decisions.

5. A Detailed and Transparent Recusal System

The committee suggests:

• Automated conflict flagging
  
• A three-year lookback period
  
• Documented and monitored recusals
  
• Public summary of recusals in SEBI’s Annual Report
  

This aligns SEBI with global standards.

6. A New Ethics Infrastructure — A Big Upgrade

The report recommends creating:

• Office of Ethics and Compliance (OEC)
  
• Oversight Committee on Ethics and Compliance (OCEC)
  

This body will review disclosures, handle complaints, guide officials, and oversee ethical practices.

Think of it as SEBI’s internal watchdog.

7. A Strong Whistleblower System

The new whistleblower system will allow:

• Internal complaints
  
• Public complaints
  
• Anonymous submissions
  
• Independent handling
  

The idea is to encourage transparency without fear.

8. Clear Rules for Post-Retirement Jobs

Senior SEBI officials must:

• Follow a two-year cooling-off period
  
• Disclose negotiations for new employment
  
• Avoid roles that may conflict with past duties
  

This reduces the risk of regulatory capture.

9. Training and Culture-Building

The report emphasizes:

• Ethics training at induction
  
• Regular refresher courses
  
• Culture-building to promote integrity
  

This might sound simple, but it has long-term impact. Ethical culture isn’t built through rules — it’s built through practice.

Why This Report Matters for Investors

You might wonder, “All this is internal to SEBI. How does it affect me?”

Here’s why it matters:

1. Better trust = better markets

Markets run on confidence.
A trusted regulator means fewer shocks, fewer scandals, and smoother operations.

2. Reduced risk of biased decision-making

If the people at the top follow strict rules, decisions remain fair.

3. More transparency

Public disclosures and recusals keep SEBI accountable.

4. Alignment with global standards

This makes India’s markets more attractive to global investors.

5. Prevention of insider misuse

Strict trading restrictions protect retail investors.

In short, a stronger SEBI means a stronger market ecosystem.

How SEBI Compares Globally After These Changes

Before this, SEBI lagged behind global regulators in transparency and internal governance.

After implementing the recommendations of the SEBI conflict of interest report, SEBI would be:

• On par with the US SEC in terms of public disclosure
  
• Close to UK’s FCA in managing conflict-of-interest standards
  
• Similar to Germany’s BaFin for compliance review
  
• Stronger than many Asian regulators in terms of ethics infrastructure
  

This is a huge step forward for India.

Final Thoughts: A Quiet but Important Shift

When I finished reading the SEBI conflict of interest report, one thing stood out: this isn’t just about rules. It’s about culture. It’s about strengthening the ethical backbone of India’s financial system.

These reforms might not grab attention instantly, but over time, they will influence:

• How SEBI supervises markets
  
• How fairly decisions are made
  
• How much trust investors place in the system
  
• How global institutions evaluate India
  

If SEBI implements these changes fully, it will set a new benchmark for market governance in the country. And honestly, that’s exactly what India needs as it aims to build Viksit Bharat by 2047.