The Securities and Exchange Board of India (SEBI) has greatly strengthened its employee conduct framework by making substantial changes to its service regulations in order to make the process more transparent and eliminate conflicts of interest and to generate confidence in the country’s capital markets regulator.
New SEBI (Employees' Service) (Amendment) Regulations, 2026, also establish stricter regulations on post-retirement employment, personal investment, disclosure of family financial information and gift acceptance, in line with the regulator’s calls for ethical standards.
Two-Year Cooling-Off Period Introduced
One of the major changes is the implementation of a two-year cooling-off period for former SEBI officials.
Under the new regulations, retired employees will be prohibited from representing clients before SEBI in matters such as investigations, settlement proceedings, fundraising applications and regulatory approval processes for two years after leaving the organisation.
The measure is a way to prevent potential conflicts of interest and ensure that former officials do not use their previous positions or insider knowledge to influence regulatory decisions.
Investment Restrictions Expanded
SEBI has also tightened investment rules for its serving employees by extending restrictions to their family members.
According to the new rules, employees and their families will not be allowed to make fresh investments in equity shares, equity-convertible instruments or derivatives during the employee's tenure with the regulator.
The move is to eliminate any influence of insiders or perceived bias while employees are in charge of keeping India's securities markets running.
But investment in regulated pooled vehicles will be allowed. Employees can still invest in products like mutual funds and Real Estate Investment Trusts (REITs), as these are professionally managed and carry lower conflict-of-interest risks.
As a result of this, SEBI also restricts investments in some regulated investment products to 25% of an employee's overall investment portfolio, thereby diversifying the portfolio while maintaining strict compliance.
There have been limited exemptions in specific cases, including employee stock options (ESOPs) given to spouses and investments made through discretionary portfolio management services.
Broader Definition of Family
The regulator expanded the scope of compliance by expanding the definition of family and dependent.
The new regulations now include adopted children, stepchildren and people who are heavily dependent on the employee. This kind of broad definition ensures that investment restrictions and disclosure obligations take into account a much broader group of people and thus reduce the risk of indirect conflicts of interest.
Mandatory Disclosure of Job Negotiations
In another important reform, SEBI employees will now have to disclose any employment discussions with prospective employers.
Under the new rules, officials must inform the regulator within one month of starting employment negotiations, so as to protect them from that sort of situation where the decisions of regulators might be affected by the future career prospects.
This provision is intended to enhance transparency and strengthen ethical decision-making among employees working on sensitive regulatory matters.
Gift Disclosure Norms Relaxed but Clarified
In addition, SEBI has also revised its gift disclosure policy.
The reporting threshold for gifts has been increased from ₹10,000 to ₹50,000, which is much lower to verify for more routine exchanges while also keeping track of high-value gifts.
The new regulations also provide more clarity on what constitutes customary or appropriate gifts and will help employees comprehend how to behave within the new parameters.
Strengthening Regulatory Integrity
The new amendments are part of SEBI’s overall objective to uphold high standards of governance, accountability and integrity. With expanded post-employment requirements, investment guidelines for family members and disclosure requirements, the market regulator strives to restore public trust and ensure that employees do not have conflicts of interest.
We expect the new framework will strengthen SEBI's work as the capital market regulator of India and its governance practices to be consistent with the global standards of financial regulators.
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