Securities Market Code Bill May Be Introduced In Parliament In Winter Session

The government is likely to introduce a bill seeking to strengthen investor protection and help boost ease of doing business in the country's financial markets in the ongoing Winter session of Parliament.

The three-week-long winter session is set to conclude on December 19. The Securities Markets Code Bill 2025 seeks to merge the provisions of the Securities and Exchange Board of India Act, 1992, the Depositories Act, 1996 and the Securities Contracts (Regulation) Act, 1956 into a unified code.

The Securities Markets Code, 2025, seeks to repeal the three Acts, rationalise and consolidate the existing provisions and provide a modern regulatory framework for investor protection and capital mobilisation at a scale commensurate with the emerging needs of the fast-growing Indian economy, as per the Statement of Objects and Reasons of the Bill circulated among MPs.

The Code endeavours to build a principle-based legislative framework to reduce compliance burden, improve regulatory governance and enhance dynamism of the technology-driven securities markets, it added.

The language of the Code has been simplified to remove obsolete and redundant concepts, duplication of provisions and incorporate consistent regulatory procedures for standard processes, and ensure a uniform and streamlined framework of Securities Laws, it said.

It is expected to further develop the financial sector in general and securities markets in particular and make India self-reliant in terms of mobilising capital for productive investment, it added.

As these laws were enacted decades ago, a review was required to reform the extant legislative framework to align with the evolving regulatory practices, latest developments in technology and the changing character of securities markets, it noted.

The single securities markets code was first proposed in the Union Budget 2021-22, when Union Finance Minister Nirmala Sitharaman announced the plan to consolidate the Sebi Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalised single securities market code.

With regard to investor protection, it said, the Code seeks to strengthen this and promote investor education and awareness, and ensure effective and time-bound redressal of investor grievances.

It enables effective and prompt resolution of investor grievances by introducing the concept of an Ombudsperson as a comprehensive platform for redressal of any unresolved grievances.

The Code also enables the Board to establish a Regulatory Sandbox to facilitate innovation in financial products, contracts and services. Furthermore, an enabling framework is established for the inter-regulatory coordination of other regulated instruments to facilitate a seamless process for listing such instruments.

In a bid to improve transparency, the Code seeks to strengthen the regulatory mechanism of the 'Board' by providing a transparent and consultative process for issuing any subordinate legislation.

'It also requires periodic review of such regulations for their proportionate and effective implementation and regulatory impact assessment studies. The Code seeks to eliminate conflict of interest by requiring the Members of the 'Board' to disclose any 'direct or indirect' interest while participating in decision-making,' it said.

It seeks the 'Board' to maintain a reserve fund and transfer the surplus, if any, to the Consolidated Fund of India, the code said, adding that it streamlines the adjudication procedure and ensures that all quasi-judicial actions are undertaken through a single adjudication process after an appropriate fact-finding exercise.

The Code maintains an arm's length separation between inspection or investigation and adjudication proceedings and defines timelines for investigations and interim orders for a time-bound completion of the enforcement process.

As a significant progressive step, it said, the Code decriminalises certain contraventions of minor, procedural and technical nature into civil penalties to facilitate the ease of doing business and to reduce the compliance burden.

'The civil penalties are anchored to unlawful gains or losses caused with a view to ensuring appropriate and adequate response to the gravity of the contraventions. It promotes standardisation in quantifying unlawful gains and losses to investors and fosters objectivity in undertaking enforcement actions like penalty imposition,' it said.

However, punishment for market abuse is provided to deter persons from committing contraventions that adversely affect market integrity.

Further, it said the Code provides a restriction period for initiating inspection or investigation to avoid delayed enforcement measures.