UPSC CURRENT AFFAIRS – 25th March 2025

Home UPSC Current Affairs SEBI to constitute committee to decide on conflict of interest of board members

SEBI to constitute committee to decide on conflict of interest of board members

Why in News?

In response to conflict-of-interest allegations, the Securities and Exchange Board of India (SEBI), in its March 24, 2025 meeting, decided to constitute a High-Level Committee (HLC). The committee will undertake a comprehensive review of conflict-of-interest provisions, disclosure norms, and governance mechanisms for SEBI members and officials.

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) is the regulatory authority for the securities market in India, responsible for ensuring investor protection, market transparency, and the orderly functioning of stock exchanges.

Establishment and Legal Framework

Established: April 12, 1988, as a non-statutory body.
Given statutory status: SEBI Act, 1992, granting it autonomy and regulatory powers.
Headquarters: Mumbai, Maharashtra.

Objectives of SEBI

Protecting investors’ interests from fraud and malpractices.
Regulating the securities market to ensure transparency and efficiency.
Developing the securities market by introducing modern technology and reforms.
Preventing insider trading and unfair trade practices.

Functions of SEBI

SEBI performs three main functions:

Regulatory Functions
- Regulates stock exchanges, brokers, and intermediaries.
- Monitors Foreign Portfolio Investors (FPIs) and Mutual Funds.
- Imposes disclosure requirements for companies raising capital.
Developmental Functions
- Promotes investor awareness through education and grievance redressal.
- Encourages the adoption of electronic trading and digital payment systems.
Protective Functions
- Prohibits insider trading and fraudulent activities.
- Introduces strict norms for corporate governance.
- Implements measures to curb price manipulation in the stock market.

Structure of SEBI

Chairman – Appointed by the Government of India.
Board Members – Includes representatives from the Finance Ministry, RBI, and corporate sector.

Major SEBI Reforms

SEBI (Prohibition of Insider Trading) Regulations, 2015 – Stricter insider trading rules.
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 – Enhanced corporate transparency.
SEBI’s role in IPO regulations – Ensures fair pricing and investor protection in Initial Public Offerings (IPOs).

Key Decisions of SEBI Board

Formation of a High-Level Committee (HLC)

- The HLC will consist of eminent experts from constitutional, statutory, and regulatory bodies, as well as professionals from government, public sector, private sector, and academia.
- The committee’s recommendations will be submitted within three months and placed before the SEBI board for consideration.
- Objective: Enhance transparency, accountability, and ethical standards among SEBI officials.
- SEBI Chairman Tuhin Kanta Pandey emphasized the need for a structured framework to ensure disclosures and prevent ethical violations.
Revision in Foreign Portfolio Investor (FPI) Threshold
- SEBI has raised the disclosure threshold for FPIs from ₹25,000 crore to ₹50,000 crore in equity Assets Under Management (AUM).
- FPIs exceeding ₹50,000 crore in AUM must provide additional disclosures, per SEBI’s August 24, 2023 circular.
- Rationale: The cash equity market trading volume has more than doubled, from ₹58,000 crore in FY23 to ₹1,18,000 crore in FY25.
- No changes were made to the existing rule that FPIs holding over 50% of their AUM in a single corporate group must disclose under the additional disclosure framework.
Strengthening Governance of Market Infrastructure Institutions (MIIs)
- SEBI approved changes in governance norms for MIIs, particularly:
  - Appointment of Public Interest Directors (PIDs) – who act as SEBI’s representatives in MIIs.
  - Cooling-off period for Key Management Personnel (KMPs) and Directors to prevent conflicts of interest.

SEBI’s Stance on Market Volatility

SEBI denied increased market volatility, stating that fluctuations were higher last year.
The regulator continues to monitor operators involved in market manipulation, including pump-and-dump schemes.

Conclusion

SEBI’s latest reforms reflect a proactive approach to governance, transparency, and market stability. The formation of HLC, revision of FPI norms, and strengthening of MII governance aim to bolster investor confidence and reinforce SEBI’s credibility as India’s capital market regulator.