High-Level Committee (HLC) to undertake a comprehensive review on conflict of interest, disclosures pertaining to property, investments, liabilities etc. has submitted its report. Securities and Exchange Board of India (SEBI), in a press release issued on Monday, stated that the committee has submitted its report today.
SEBI had formed a High-Level Committee in April under the Chairmanship of retired IAS officer and former CVC, Pratyush Sinha. Other members of the committee included former MCA Secretary and former Chairman, IFSCA, Injeti Srinivas as Vice Chairman of the committee, Founder & Director, Kotak Mahindra Bank, Uday Kotak, former Executive Director, RBI and former Whole Time Member, SEBI, G Mahalingam, Sarit Jafa, retired IA&AS, former Deputy Comptroller and Auditor General, and Prof. R Narayanaswamy, former Professor, IIM Bangalore, as an academic member.
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SEBI has not disclosed in the press release the details of the recommendations of the HLC. But as per sources, the suggestions to the committee were wide-ranging, including making all disclosures of SEBI board members public instead of leaving it to the board cell of the regulator, and having an Ombudsman-like mechanism, independent from SEBI. One of the invitees had suggested that the existing structure of Chief Vigilance Officer (CVO) at SEBI needs a relook as it may have a conflict.
A complete ban on share trading by SEBI board members and officials was also suggested. A higher level of scrutiny by the Parliamentary Standing Committee, as in the US, was also suggested, and recording of proceedings of the committee to be made public was also suggested by some invitees.
Suggestions also included well laid out norms for recusals, disclosures and investments. Though SEBI’s Whole Time Members recuse themselves from cases where there is likely a conflict of interest, no standard process is defined. There were allegations of selective recusals and hence the issue was flagged to the HLC.
A SEBI board note on the HLC said that the code of conflict is in addition to the provisions of the SEBI Act and other regulations applicable to SEBI board members, including the Chairman and officials, like the SEBI (Procedure for Board Meetings) Regulations.
Also, the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992, are applicable in dealing with financial and other interests of members which are likely to affect or influence their functions as Members.
SEBI officials are also governed by SEBI (Employees’ Service) Regulations, 2001, which specify the provisions on private trading, restrictions on investments, speculation in stocks, shares, investments, misuse of official position, acceptance of gifts, declaration and approvals relating to movable, immovable and valuable property etc.
SEBI Chairman Tuhin Kanta Pandey, in his first board meeting after taking charge, had announced the formation of the HLC on the issue. The Terms of Reference of the HLC were to review the existing policies and frameworks governing conflict of interest, disclosures and related matters and identify any gaps or ambiguities, and also recommend a robust framework for preventing, mitigating and managing conflict of interest, including a recusal policy, disclosure requirements covering public disclosures, provisions pertaining to restriction on investments, maintenance of digital records and framework for monitoring etc. Additionally, to suggest a mechanism for members of the public to raise concerns pertaining to conflict of interest and disclosures, including the process to examine complaints.
SEBI’s existing code on conflict of interest for board members was voluntarily adopted by the board in December 2008, when C B Bhave was the Chairman.
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