Securities Market Code Bill introduced in Parliament, proposals ranging from SEBI to common investors

News Topical, Digital Desk : The Securities Markets Code Bill, 2025, was introduced in the Lok Sabha on Thursday (December 18). The bill seeks to restructure the legal framework for India's securities markets to promote ease of doing business. It will consolidate several existing laws and revamp regulatory, enforcement, and investor protection mechanisms.

This bill proposes to repeal the SEBI Act, 1992, the Depositories Act, 1996, and the Securities Contracts (Regulation) Act, 1956 and consolidate them into a single, principle-based code that will govern the entire securities market.

What is the purpose of the new bill? The government has stated that the proposed code aims to simplify the legal framework of the capital markets. The proposed framework, replacing disparate laws, will increase regulatory clarity and avoid duplication. This will promote ease of doing business.

Strengthening the role of SEBI: The bill proposes to strengthen the governance and regulatory framework of the Securities and Exchange Board of India (SEBI), referred to as the "Board" herein. It will require Board members to disclose any direct or indirect interests they hold when making decisions. It also proposes to make the process of formulating subordinate legislation, such as rules and regulations, more transparent and consultative.

Relief for Minor Violations: To enhance the efficiency of rule enforcement, the Code proposes a single adjudication process for all quasi-judicial proceedings. Furthermore, timelines have been set for investigations and interim orders to ensure timely completion. The Bill proposes converting minor criminal and procedural violations into civil penalties. Criminal provisions will be retained only for serious violations—such as market abuse, non-compliance with quasi-judicial orders, and non-cooperation in investigations.

Investor Grievance Redressal: To strengthen investor protection, the Bill proposes introducing an Ombudsman mechanism. This aims to provide an additional platform for resolving investor complaints, which will facilitate timely resolution of investor grievances.

Regulatory Sandbox for Innovation: The Bill empowers SEBI to establish a regulatory sandbox to promote innovation in financial products and services. This framework will allow testing in a controlled environment, thereby managing regulatory and investor risks.

Unnecessary provisions will be removed. The proposed code adopts a principles-based approach and simplifies the language by removing unnecessary and repetitive provisions. According to the government, this will enhance legal clarity and make the law easier to understand for all market participants. The Securities Markets Code Bill, 2025 will now be sent for further parliamentary scrutiny, including the possibility of examination by a standing committee, after which it will be considered and passed.