The amended code introduces a comprehensive framework covering actual, potential and perceived conflicts of interest, mandatory recusals, tighter investment restrictions, enhanced disclosures and a dedicated Office of Ethics and Compliance
The Securities and Exchange Board of India’s (SEBI's) revised code of conduct has adopted several features seen in mature financial regulators such as the US Securities and Exchange Commission (SEC) and the UK's Financial Conduct Authority (FCA), tightening a largely disclosure-based conflict management regime to one centred on prevention.The amended code introduces a comprehensive framework covering actual, potential and perceived conflicts of interest, mandatory recusals, tighter investment restrictions, enhanced disclosures and a dedicated Office of Ethics and Compliance (OEC).Ethics officeThe biggest institutional change is the creation of a dedicated Office of Ethics and Compliance, which will handle disclosures and oversee conflict management. The new framework also introduces a formal recusal system and a material financial interest threshold of ₹20 lakh or 5 per cent, meant to separate minor holdings from those that could affect decision-making.Alay Razvi, Managing Partner, Accord Juris, said the shift is significant because it changes the regulator’s approach from passive reporting to active control. “The amended framework moves SEBI closer to global regulatory standards by strengthening disclosure, recusal, ethics oversight and restrictions on non-permitted investments,” he said. But the real test will be daily use of the code, not the wording on paper.“The phrase ‘perceived conflict’ is useful because it captures situations where public trust may be affected even if no actual conflict exists. However, it is also inherently subjective unless the code gives objective markers, illustrations and a decision-making framework,” Razvi said.That problem becomes sharper in provisions dealing with “close friendships” and relationships over the past three years. Those categories are harder to define and easier to interpret differently. “Close friendships is not a precise legal category, so implementation may depend heavily on personal judgment unless the code is supported by examples or internal guidance,” Razvi said.Tushar Kumar, Advocate, Supreme Court of India, said the new OEC is perhaps the most consequential institutional reform within the Code, but its reporting line should have been more clearly set out. Without that clarity, he said, independence could become a question mark in sensitive matters.Amit Tungare, Managing Partner, Asahi Legal, said, “Expanding investment bans to immediate family members, imposing a strict two-year cooling-off period and codifying a formal recusal mechanism structurally shifts SEBI from a ‘disclosure-based’ internal compliance model to a proactive prevention model,”Tungare said the recusal framework will matter most in enforcement and adjudication, where even the appearance of bias can weaken a case later. “In a specialised regulator like SEBI, frequent recusals can slow investigations, supervisory decisions, enforcement approvals and internal reviews,” he said.Raheel Patel, Partner, Gandhi Law Associates, said the new framework still needs practical guardrails. He said the rules on close relationships reflect a modern understanding of conflicts of interest, but can still create ambiguity unless backed by objective criteria or examples.Published on July 14, 2026
