SEBI Relaxes Investment Restrictions For Spouses' ESOPs Under Amended Employees' Service Regulations

The Securities and Exchange Board of India (SEBI) on 7 July amended its Employees' Service Regulations to exempt employee stock options (ESOPs) received by the spouses of SEBI employees through their employment from the investment restrictions applicable to employees' family members.

Under the amended regulations, such ESOPs will not be treated as restricted investments held by family members of SEBI employees. The regulations also clarify that inadvertent violations by a spouse or dependent family member will not affect an employee's career progression, though monetary penalties may be imposed in appropriate cases.

The changes further exempt family members who use discretionary portfolio management services or deal in unlisted securities as part of their private business or investment activities from the investment restrictions.

SEBI has also allowed employees to choose how to deal with non-permitted investments held at the time of joining SEBI and expanded disclosure requirements relating to family members, professional interests, financial investments and immovable properties.

Additionally, the regulations introduce a recusal framework for matters involving conflicted relationships, impose a two-year cooling-off period on former employees appearing before SEBI, and raise the gift disclosure threshold from Rs. 10,000 to Rs. 50,000.