Context:

Recently, the Union Government introduced the Securities Markets Code Bill, 2025 in the Lok Sabha, proposing a comprehensive overhaul and consolidation of securities market regulation in India.

Background:

• •  India’s securities markets are currently governed by multiple laws enacted over different periods—namely, the Securities Contracts (Regulation) Act, 1956; the SEBI Act, 1992; and the Depositories Act, 1996. Over time, these statutes have developed overlapping provisions, outdated regulatory concepts, and procedural complexities, leading to regulatory ambiguity and compliance challenges.
  • The proposed Bill seeks to repeal and replace these fragmented laws with a single, principle-based Securities Markets Code (SMC). The objective is to provide regulatory clarity, coherence, and flexibility in line with evolving market practices, technological innovation, and global standards.

Key Features:

1. Consolidation and Simplification

The Bill merges the three legacy laws governing securities markets into a unified legal Code. This consolidation eliminates redundant provisions and simplifies statutory language, thereby reducing interpretative conflicts and lowering compliance burdens for market participants.

2. Strengthening SEBI

• • The Securities and Exchange Board of India (SEBI) continues as the principal regulator under the Code.
  • The SEBI Board is proposed to be expanded from nine to a maximum of fifteen members, enabling broader expertise and enhanced decision-making capacity.
  • Robust conflict-of-interest norms are introduced, mandating disclosure of direct or indirect financial interests. The Code empowers the government to remove Board members where such interests compromise regulatory independence or fiduciary duties.

3. Regulatory Framework and Enforcement

• • Minor procedural and technical violations are proposed to be decriminalised and treated as civil defaults, reinforcing the objective of ease of doing business.
  • Serious offences—such as market abuse, non-compliance with regulatory directions, and obstruction of investigations—continue to attract stringent penalties.
  • A single, streamlined adjudication framework is established, with time-bound timelines for investigations and interim orders, improving predictability, consistency, and enforcement efficiency.

4. Investor Protection and Market Integrity

• • The Code provides statutory backing to an Investor Charter, a time-bound grievance redressal mechanism, and the appointment of an Ombudsperson for unresolved complaints.
  • It authorises SEBI to establish a Regulatory Sandbox, allowing controlled experimentation with innovative financial products and services while safeguarding systemic stability and investor interests.

5. Inter-Regulatory Coordination

·    The Bill facilitates enhanced coordination among financial sector regulators and enables smoother listing and regulatory oversight of financial instruments that fall under multiple regulatory jurisdictions.

Conclusion:

The Securities Markets Code Bill, 2025 marks a significant legislative step towards modernising India’s capital market framework. By introducing a coherent, principle-based regulatory architecture, the Bill aims to strengthen investor confidence, improve regulatory governance, and attract both domestic and foreign investment. Its emphasis on compliance facilitation, time-bound enforcement, innovation support, and market integrity aligns closely with India’s broader financial sector reforms aimed at deepening capital markets and sustaining long-term economic growth.