India’s market regulator plans tougher conflict-of-interest rules for officials

MUMBAI: India’s market regulator on Monday approved stricter conflict-of-interest rules for officials, requiring senior staff to liquidate or freeze personal equity holdings on joining and stop trading while in office.

The Securities and Exchange Board of India (SEBI) reviewed its rules after former chief Madhabi Puri Buch faced conflict-of-interest allegations from now-shuttered Hindenburg Research over links to the Adani group, which was under investigation. Buch and the Adani group denied the allegations.

The new rules - which will take effect after the federal government notifies them - were part of the sweeping changes proposed by a panel in November, with SEBI approving many of them.

Under the revised rules, SEBI’s top four levels of officials, including the chairperson, must disclose immovable assets.

Officials must also recuse themselves from matters involving material financial interests or other conflicts, with SEBI planning to introduce a digital recusal process.

“Even if the government does not notify changes to address conflict of interest rules, we will voluntarily adopt it,” SEBI Chairman Tuhin Kanta Pandey said.

Separately, SEBI eased settlement rules for foreign portfolio investors to net settle their trades, helping them reduce funding needs and trading costs. These large investors often execute multiple trades a day, and currently must settle each trade separately, which ties up capital.

The new settlement mechanism will be implemented from December31 this year, SEBI said.

Use of the new mechanism will be mandatory, an official told Reuters on the sidelines of the SEBI board meeting.

Net settlement is expected to help exchange-traded and index funds, especially on index rebalancing days. It will not apply to intraday single-stock trades and will be optional.

The move comes amid heavy foreign selling of Indian equities, driven by the country’s limited exposure to the global AI trade, more attractive valuations in other emerging markets and the US-Israeli war on Iran.

Outflows totalled a record USD18 billion in 2025, while FPIs have net sold USD11.48 billion so far this year. March net sales of USD9.57 billion put the month on track for the biggest monthly outflow since October 2024.

SEBI also relaxed “fit and proper” rules for market intermediaries, saying a criminal complaint alone would not be grounds to reject or cancel registration.

The measures are part of steps Pandey has taken to ease rules and improve access for foreign investors since he became chairman more than a year ago.

In January, the regulator approved a closing-session trading window and eased access for sovereign-backed and overseas retail funds.