SEBI Tightens Employee Conduct Rules with Stricter Investment and Disclosure Norms

AI FEED

SEBI has introduced a two-year cooling-off period for former employees.
Fresh investments in equities and derivatives by employees and their family members will be restricted during service.
Employees must disclose employment negotiations with prospective employers within one month.

MUMBAI: The SEBI employee conduct rules have been significantly strengthened following amendments to the regulator’s service regulations. The revised framework introduces stricter conflict-of-interest safeguards, expands disclosure obligations and places tighter restrictions on investments by employees and their family members.

The changes are aimed at reinforcing transparency, protecting regulatory independence and maintaining public confidence in India’s capital market regulator.

SEBI Employee Conduct Rules Introduce Cooling-Off Period

Under the amended regulations, former SEBI officials will be subject to a two-year cooling-off period after leaving the organisation.

During this period, they will not be permitted to represent clients before SEBI in matters involving investigations, settlement proceedings, fundraising applications or regulatory approvals. The measure is intended to minimise potential conflicts of interest and prevent the misuse of insider knowledge gained during public service.

The regulator has also strengthened disclosure requirements by directing employees to report any employment discussions with prospective employers within one month of initiating such negotiations.

Investment Restrictions Expanded to Family Members

The revised regulations extend investment restrictions beyond employees to include their family members.

Fresh investments in equities, equity-convertible instruments and derivatives will not be permitted during an employee’s tenure with SEBI. At the same time, the regulator has expanded the definition of family and dependent to include adopted children, stepchildren and individuals who are substantially dependent on the employee.

However, investments through regulated pooled investment products will continue to be allowed. These include:

Mutual funds
Real Estate Investment Trusts (REITs)

SEBI has also capped investments in certain regulated investment products at 25% of an employee’s total investment portfolio.

Revised Gift Disclosure and Limited Exemptions

The amended rules provide limited exemptions for specific situations, including employee stock options granted to spouses and investments managed under discretionary portfolio management services.

SEBI has also revised its gift disclosure policy by increasing the reporting threshold from ₹10,000 to ₹50,000. The updated framework also clarifies the types of customary gifts that employees may accept under the regulations.