- SEBI mandates employees to exit, freeze, or plan disposal of non-permitted investments upon joining
- Existing employees must liquidate or freeze non-permitted investments within a specified timeline
- Employees cannot exercise shareholder rights or vote on non-permitted investments after the deadline
The Securities and Exchange Board of India (SEBI) has overhauled its employee code of conduct, requiring staff to exit, freeze or lay out a plan to dispose of investments that are not permitted under the regulator's ethics framework.
According to a gazette notification dated July 11, new employees must liquidate non-permitted investments, freeze them, or disclose a time-bound plan to exit such holdings when they join the regulator. Existing employees holding such investments will also be given a timeline to either liquidate or freeze them.
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The revised framework also restricts employees from exercising shareholder rights on investments that are not permitted. Employees who continue to hold such assets after the prescribed period will not be allowed to vote or claim corporate action benefits. They will also be barred from subscribing to rights issues related to such investments while in service.
SEBI has expanded disclosure requirements as part of the revised ethics norms. Employees will now have to disclose professional interests from the preceding three years, along with any negotiations for future employment within 30 days. They will also be required to disclose details of their financial investments, liabilities and non-permitted investments at the time of joining and upon leaving the regulator.
The notification further mandates disclosure of changes in family details, rental agreements and transactions involving immovable property within 30 days. Gifts valued above Rs 50,000 received from friends during marriages or other occasions must also be reported.
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In a move aimed at addressing potential conflicts of interest after public service, SEBI has imposed a two-year cooling-off period during which former employees cannot appear before or against the market regulator.
The notification defines non-permitted investments to include equities, equity-linked instruments and equity and commodity derivatives. The investment restrictions will also apply to specified family members of SEBI employees.
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