SEBI
CONFLICT OF INTEREST - ECONOMY
News: SEBI’s
‘Code on Conflict of Interest’ seeks to ensure that the board ‘conducts in a
manner that does not compromise its ability to accomplish its mandate or
undermine the public confidence’ in the body.
What’s
in the news?
- About Conflict of Interest: According
to the Code, it refers to “any personal interest or association of
a board member, which is likely to influence the decision of the
Board in a matter, as viewed by an independent third
party”.
- It
can constitute a number of different things, which are either
barred altogether or need to be disclosed by the concerned board member.
- Comprises:
- Certain
Transactions in Shares: The Code says
that a member must disclose their, and their family’s
(spouse, dependent children below 18 years of age) holdings within
15 days of the assumption of Office, and annually update this
disclosure within 15 days of the close of the financial year.
- Moreover, substantial
transactions (greater than 5,000 shares or of monetary value of
1 lakh) need to be disclosed within 15 days of such a
transaction.
- Also,
members are not allowed to deal in shares based on “unpublished
price sensitive information which he may have got access to”.
- Outside
Private Activities: SEBI board members
are not allowed to hold any other office of profit, i.e.
a position that brings or has the potential to bring to the person
holding it some financial gain, advantage, or benefit.
- They
are also not allowed to engage in any other professional
activity, “which entails receipt of salary or professional
fees”.
- Acceptance
of Gifts: Board members are not allowed
to accept “any gift by whatever name called, to the extent
possible, from a regulated entity”.
- If
they do receive such a gift whose value exceeds Rs 1,000, they
have to hand it over to the General Services Department of the SEBI, and
are not allowed to keep it.
- Miscellaneous
Situations: Members are bound to disclose
“any post, other employment or fiduciary position” which they
hold or have held in the past five years, in connection
with any regulated entity.
- It
includes being a board member of a company, or being employed as a
consultant by a company.
- They
must disclose “any other significant relationship, including a
professional, personal, financial or family relationship held in
connection with a regulated entity” and “any honorary position, by
whatever name called, in any organisation”.
- Procedure to Manage Conflict of
Interest: SEBI board members are to “take all
steps necessary to ensure that any conflict of interest does not affect
any decision of the Board” and not to “exploit to his personal advantage,
any personal or professional relationship with regulated entities or any
employee of such entities”.
- Disclosures and Recusals: Disclosures
have to be made “at the earliest possible opportunity”. If any member is
unsure whether there is a conflict of interest or not, they “shall seek
determination from the Chairman”.
- If
the chairman is in doubt regarding their own
conflict of interest, she has to “seek determination from the
[entire] Board”.
- No Exception: If
the chairman or the board determines that there is indeed a conflict of
interest, the concerned member “shall refrain from dealing with
the particular matter”. No Member shall hear or decide any matter
where he/she has a conflict of interest and there is no scope for an
exception.
- Confidentiality: As
per the Code, the information as disclosed under this Code shall be kept
confidential save in the following circumstances. These circumstances
include:
- Where
there is a requirement for disclosure for the purposes of managing
potential or actual conflicts;
- Where
there is a requirement for disclosure following the change of
responsibilities of a Member;
- Where
there is a requirement for the purposes of disciplinary
proceedings; or
- Where
there is any legal or regulatory obligation to disclose
the information.
- Maintained by: The
custody of all documents/records pertaining to board members’ disclosures
is maintained by the secretary to the board.
- Members
of the public can bring material evidence to
this secretary in case they believe that “a Member has an interest in a
particular matter”. The secretary is obligated to place
the details of such a matter to the board.
Source: https://indianexpress.com/article/explained/sebi-board-conflicts-of-interest-9509841/