SEBI pushes for transparency, introduces stricter employee code

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The Securities and Exchange Board of India (SEBI) has tightened its employee conduct framework by notifying sweeping changes to its service regulations, introducing stricter conflict-of-interest safeguards, tighter investment restrictions and enhanced disclosure requirements.

Under the SEBI (Employees' Service) (Amendment) Regulations, 2026, the capital markets regulator has expanded the definitions of 'family' and 'dependent' to include adopted and stepchildren, as well as individuals who are substantially dependent on an employee.

The decision broadens the scope of compliance requirements relating to investments, disclosures and other service obligations.

One of the key changes is the introduction of a two-year cooling-off period for former SEBI employees.

During this period, retired or resigned employees will not be permitted to represent any person before the regulator in matters related to proceedings, adjudication, settlements or approvals.

In addition, the amended regulations require employees to disclose any employment negotiations with prospective employers within one month of initiating such discussions, strengthening safeguards against potential conflicts of interest.

The market watchdog has also introduced a clear distinction between permitted and non-permitted investments for its employees.

Under the revised rules, employees and their family members will not be allowed to make fresh investments in equities, equity-convertible instruments or derivatives during the employee's tenure with the regulator.

However, investments through regulated pooled investment vehicles such as mutual funds and real estate investment trusts (REITs) will continue to be permitted.

Moreover, the regulator has capped investments in certain regulated investment products at 25 per cent of an employee's total investment portfolio. Limited exemptions have been provided for specific cases, including employee stock options granted to spouses and investments managed under discretionary portfolio management services.

In another major change, SEBI has revised its gift disclosure norms by increasing the reporting threshold from Rs 10,000 to Rs 50,000, while also providing greater clarity on customary gifts that may be accepted under the rules.

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