SEBI officials must liquidate or freeze equity holdings before joining the regulator and cannot trade securities during their tenure.
The revised code extends investment restrictions to spouses and dependent children, with limited exemptions for ESOPs and pooled investment vehicles.
Employees cannot invest more than 25% of their total portfolio in products managed by a single SEBI-regulated fund manager.
The Securities and Exchange Board of India (SEBI), has introduced a stricter code governing the personal investments of its employees, requiring officials to liquidate or freeze their equity holdings before taking office and prohibiting securities trading during their tenure, Reuters reported.
The revised framework marks a significant tightening of the regulator's conflict-of-interest safeguards compared with the code adopted in 2008. It aims to strengthen public confidence in the integrity and independence of SEBI officials by imposing stricter disclosure and investment norms.
4 July 2026
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The markets regulator decided to revisit its conflict-of-interest framework after former Chairperson Madhabi Puri Buch faced conflict-of-interest allegations from US-based short seller Hindenburg Research.
Wider Scope of Investment Restrictions
According to the report, one of the most notable changes is the expansion of the investment restrictions beyond employees themselves.
The new rules now cover immediate family members, including spouses and dependent children, to minimise the possibility of indirect conflicts of interest or the appearance of preferential access to market-sensitive information.
However, the framework provides limited exemptions in certain cases. Investments acquired through employee stock option plans (ESOPs) and holdings in pooled investment vehicles will continue to be permitted under specified conditions, recognising that these are generally passive investments with limited scope for influencing trading decisions.
In addition to restrictions on direct equity ownership, SEBI has also introduced limits on the concentration of investments managed by any single regulated entity.
Under the revised code, employees cannot allocate more than 25% of their total investment portfolio to products managed by one SEBI-regulated fund manager. The cap applies across investment products, including mutual funds, portfolio management services (PMS), and alternative investment funds (AIFs).
The diversification requirement is intended to reduce the potential for conflicts arising from significant financial exposure to a single regulated intermediary while encouraging broader distribution of investments.
By extending compliance obligations to family members, restricting trading activities during service, and limiting investment concentration with individual fund managers, the regulator has sought to create stronger institutional safeguards against conflicts of interest and enhance transparency in its internal governance.
The changes come as regulators globally face increasing scrutiny over ethical standards and personal financial dealings of officials responsible for overseeing financial markets.
