SEBI chief calls for transparent disclosure framework to address conflict of interest

In an interview with The Indian Express, recently appointed Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey addressed the challenges that arose under the previous leadership, particularly with respect to the handling of conflicts of interest.

Pandey’s comments come just a few months after the controversial three-year tenure of his predecessor, Madhabi Puri Buch, whose term ended in February.

Pandey, who took charge amid lingering questions surrounding Buch’s leadership, acknowledged that the SEBI leadership under Buch had failed to meet even “minimal expectations” in terms of transparency and disclosure.

He further pointed to the lack of public disclosures regarding potential conflicts of interest and stressed the need for a systematic approach to address such issues.

Call for disclosure framework

One of the most significant concerns raised by Pandey was the absence of a robust disclosure framework under the previous SEBI leadership. He noted that when reviewing SEBI’s policies on conflict of interest, particularly those outlined in the 2008 document governing the chairman and the board and the employee regulations, he found “virtually no public disclosures”.

“The conflict of interest in SEBI’s case is much wider. It’s a very difficult concept also. Like, how are you? Where is your thing? What is family? Where does it extend? Because virtually the listed companies are everywhere,” Pandey told The Indian Express.

He emphasised that conflict of interest is a complex issue at SEBI, as officers may have overlapping relationships with companies that are listed in India and abroad.

Pandey’s remarks come in the wake of the controversy surrounding Buch and her husband, Dhaval Buch, who were alleged to have held investments in offshore funds associated with Vinod Adani, the brother of Adani Group chairman Gautam Adani.

Although both of them denied the allegations, the issue cast a shadow over SEBI’s credibility, particularly when Hindenburg Research made claims that SEBI had failed to take appropriate action due to potential conflicts of interest involving its chairperson.

Pandey vows to tackle the ‘narrative’

Pandey acknowledged the “narrative” that had developed around the conflict of interest issue during Buch’s tenure and stressed the need for SEBI to address it directly. He said, “If you have a problem and there are questions, you need to answer in a systematic way.”

Pandey also mentioned that SEBI had set up an independent high-level committee to review the conflicts of interest of its board members, including the chairman. The committee, which includes experts from various sectors, is already at work and expected to submit a report within the next three months.

Pandey hopes that the committee's findings will provide clarity and help resolve the ongoing concerns about SEBI’s internal processes.

“When the framework gets ready, it will really put to rest this narrative that—we have to hide,” Pandey said. The committee’s mandate is to create a clear, transparent framework for handling conflicts of interest and recusal processes within SEBI.

The new SEBI chief also stressed the importance of defining recusal procedures more clearly. He questioned whether SEBI officers should recuse themselves from making decisions if they have familial ties to individuals or companies involved in certain cases.

“If SEBI officers are working, then where should they recuse, and where should they not recuse?” Pandey asked, emphasising that these processes must be well-defined, documented, and followed strictly.

Transparency and accountability

Pandey’s commitment to enhancing SEBI’s transparency is evident in his approach to conflict of interest policies. He explained that the committee would not only suggest guidelines for the board but also seek public input and draw on best practices from around the world.

“We have suggested that an independent committee, which has got eminent people from different sides, assess and suggest a framework,” Pandey said. “This framework then comes to the board, and our board takes a view, and we will implement that framework.”

The SEBI chief also made it clear that the regulator’s internal processes for handling investigations must be conducted transparently and in accordance with the law. “What we have to hide, we should hide in a manner which is actually sort of mandated. It means while you are investigating, you have to be hiding, and you have to reveal only when your investigation is complete,” he said.

Pandey stressed that the framework would provide much-needed clarity, not only within SEBI but also for the broader financial markets. By addressing the conflicts of interest and ensuring rigorous disclosure practices, SEBI aims to restore public trust in its ability to effectively regulate India’s stock markets.

The committee’s report is expected to address key areas of concern and outline steps for SEBI to implement a more transparent, accountable, and conflict-free framework going forward.