SEBI Forms Committee to Review Conflict of Interest

Mumbai, Mar 24 (PTI) The Securities and Exchange Board of India (SEBI) will set up a committee to review provisions for its members to disclose conflict of interest, months after the capital markets regulator's former head was accused of holding back on investigations against Adani group because of conflict of interest.

SEBI in its first meeting under new chairman Tuhin Kanta Pandey on Monday decided to set up a high-level committee to conduct a detailed review of conflict of interest and disclosure norms related to property, investments and liabilities of board members and officials.

The panel will comprise eminent persons and experts with relevant backgrounds and experience in constitutional or statutory or regulatory bodies, government/ public sector, private sector and academia, Pandey said adding names of members of the committee will be announced in due course.

Pandey's predecessor Madhabi Puri Buch, who demitted office at the end of February, had come under attack last year from now-shuttered Hindenburg Research which alleged that she and her husband held "hidden" holdings in Bermuda and Mauritius entities also drawn upon by the older brother of Adani group founder Gautam Adani, which possibly held the agency back from investigating fraud charges against the powerful conglomerate.

Both Buch and the Adani group had denied all allegations. Buch and her husband had stated that they "strongly deny the baseless allegations and insinuations made in the report".

Pandey, who revived the practice of holding press conferences after board decisions, said that the last time the disclosure norms were made was in 2008 and a review was necessary to build trust in the institution.

"The objective of the high-level committee is to comprehensively review and make recommendations for enhancing the existing framework for managing conflict of interest, disclosures and related matters towards ensuring the high standard of transparency, accountability and ethical conduct of members and officials of the board," he added.

Pandey mentioned that the committee will be formed soon, once the members provide their consent, and emphasized that the panel will be constituted independently from Sebi, with the markets regulator providing secretarial support.

Hindenburg made the allegations against Buch in August last year, 18 months after it accused Adani group of corporate fraud and using a web of offshore funds to evade minimum shareholder listing rules and prop-up share price. Adani had repeatedly denied all allegations.

The Supreme Court in January last year rejected demands for a court-monitored probe by the Central Bureau of Investigation or a Special Investigation Team into the allegations and asked SEBI to wind up its investigations soon.

SEBI, which is yet to make public findings from multiple long-running probes into the Adani Group, had in June last year stated that Hindenburg "indulged in unfair trade practices" in its bet against the Adani Group and had "deliberately sensationalised and distorted certain facts".

On the matter of conflicts of interest, Pandey stated that building trust is crucial and stressed that Sebi aims to operate transparently without any hidden agenda. When asked about the timing of the panel's formation, he responded by questioning, “Why not now?”

He said that we can't say that we look at it as a tacit admission of shortcomings in the recent past.

The high-level committee will also examine how Sebi officials can recuse themselves from situations involving conflicts of interest.

While Sebi already has accountability measures in place, Pandey noted that the committee would focus on refining the nuances of accountability and clarifying expectations regarding disclosures. As the market regulator Sebi is held to higher standards of accountability, and this review aims to ensure the continued integrity of its operations.

The high-level committee is expected to submit its recommendations within three months from the date of the constitution and the submissions will be placed before the board of consideration.

When asked about the specific steps Pandey is contemplating on the employee or HR front, he said, “I think we are fine”.

Buch had faced in-house employee protests against “toxic work culture”, which included instances of public humiliation and shouting down.