SEBI Notifies Sweeping Amendments to Employees' Service Regulations, 2026

The Securities and Exchange Board of India (SEBI) has notified the Securities and Exchange Board of India (Employees' Service) (Amendment) Regulations, 2026, vide notification no. SEBI/LAD-NRO/GN/2026/311 dated July 7, 2026, effective from the date of publication in the Official Gazette.

The amendment substantially overhauls the conflict-of-interest, investment, and disclosure framework applicable to SEBI's own workforce, building on the Securities and Exchange Board of India (Employees' Service) Regulations, 2001, which were last amended on September 8, 2025.

Revised and New Definitions (Regulation 3(1))

The amendment recasts several foundational definitions:

• "Dependent" now distinguishes between "dependent children" (eligible for medical/LFC benefits) and "substantially dependent" persons (included in the Group Mediclaim Policy), while expressly excluding non-dependents added to the policy on a self-funded premium basis.
• "Family members" is redefined to cover the spouse, dependent children (including step and adopted children), persons under the employee's legal guardianship who are substantially dependent, and any blood or marriage relation who is substantially dependent.
• New terms introduced include "Financial investment," "Non-permitted Investment," "Permitted investment," "Professional interest," "Relational interest," and "Relative" (aligned with Section 2(77) of the Companies Act, 2013), along with "OEC" (Office of Ethics and Compliance).

Notably, "Non-permitted Investment" covers equity, equity-convertible instruments, and equity/commodity derivatives, but expressly excludes investments through professionally managed pooled investment vehicles regulated by a financial sector regulator, and investments in InVIT/REIT units.

Post-Employment and Future Employment Disclosures (Regulations 54 and 55)

Employees must now disclose any negotiation or agreement for future employment within one month from the end of the month in which it occurs (new Regulation 54(2)). Separately, a new Regulation 55(6) bars an employee who leaves service — whether by retirement, resignation, or otherwise — from appearing before or against the Board on behalf of any other person in any matter, quasi-judicial proceeding, adjudication, settlement, or approval matter for two years from the date of relief.

Revised Gift Thresholds (Regulation 62)

The definition of "trivial gifts" is broadened to expressly include mementos, souvenirs, and bouquets, and the restriction confining trivial gifts to "the occasion of Diwali and New Year" is removed, extending the exemption year-round. The word "near" is deleted from the Explanation, widening its scope. The monetary threshold for permissible gifts is raised from Rs. 10,000 to Rs. 50,000, calculated per person from whom gifts are received.

Restrictions on Investments (Regulation 64, substituted)

The substituted Regulation 64 prohibits employees and their family members from making fresh non-permitted investments during the employee's period of service. Additionally, investment in any single SEBI-regulated entity's pooled investment vehicle products is capped at 25% of the employee's total acquisition cost of financial investments as on the last day of the preceding financial year, or the date of joining, whichever is later.

Relaxations for Family Investments (New Regulation 64A)

The restriction under Regulation 64(1) does not apply where a spouse acquires equity through an ESOP that forms part of their own pay package, including its subsequent disposal; inadvertent technical violations arising from such actions are not treated as misconduct affecting the employee's career, though monetary penalties may still apply in appropriate cases. The restriction is also relaxed where family members use discretionary portfolio management services (with independent fund manager control) or acquire/dispose of unlisted securities as part of their own private business or investment activity, including post-listing scenarios.

Transitional Options for Existing Non-Permitted Investments (New Regulation 64B)

At the time of joining, an employee holding non-permitted investments may choose to: liquidate them; freeze them until completion of service; disclose a trading plan to the OEC under Regulation 5 of the SEBI (Prohibition of Insider Trading) Regulations, 2015; or sell them with prior OEC approval absent a trading plan. Equity or convertible instruments in a commercial venture (including unlisted companies) permit only the liquidate or freeze options. Unliquidated holdings carry no voting rights during service, though corporate action receipts and rights issue subscriptions remain unaffected. Vested options must be exercised before joining, not during service. Employees in service at the time this amendment takes effect must exercise these options within a timeline to be specified, and family members may continue to hold or dispose of pre-existing non-permitted investments throughout the employee's service.

Expanded Disclosure Obligations (Regulation 66, substituted)

Employees must disclose, in a format determined by the competent authority: details of family members and relatives; professional interests over the preceding three years; immovable properties (held by the employee or family, acquired from the employee's funds or in which the employee has an interest); financial investments and liabilities similarly sourced; non-permitted investments held by family members beyond those funded by the employee; and any property rental contracts. These disclosures are due at joining and at exit, with updates required within one month of the end of the month in which changes occur (new family members, relatives, property transactions). Transactions in financial assets exceeding twice the employee's monthly basic pay must be disclosed within the same one-month timeline. Annual disclosures as on the last day of the preceding financial year are also mandated. For Grade F employees and Executive Directors, immovable property disclosures will be made public by the OEC in a manner to be prescribed.

Recusal Framework (New Regulation 66A)

A new recusal mechanism requires employees to withdraw from matters involving a "conflicted relationship" — defined to cover matters involving family members or relatives in key managerial/senior management positions at the concerned entity, professional or relational interests likely to cause bias, close friends or associates within the last three years, material investment interest (non-permitted investment exceeding Rs. 20 lakh or 5% of total financial investment acquisition cost), or investments exceeding the 25% pooled-vehicle threshold under Regulation 64(2). Recusal entails absence from discussion or decision-making, no access to related information, and non-participation in deliberations. Matters involving a class of entities or generic regulation-making fall outside this scope. A digital system will be established to record disclosures of conflicted relationships and process recusals, and employees must disclose such conflicts at the earliest opportunity.

Conclusion

These amendments materially raise the compliance bar for SEBI's own personnel, introducing a structured investment-restriction regime, an expanded and time-bound disclosure architecture, and a formal recusal mechanism backed by digital tracking. Entities and professionals interacting with SEBI officials — particularly on matters involving related persons or ongoing engagements — should note the two-year post-exit representation bar under Regulation 55(6), as it may affect engagement of former SEBI personnel in advisory or representational capacities.