Securities Markets Code Bill 2025: Towards a Unified, Principle-Based Securities Regulation

The Securities Markets Code Bill 2025 marks a major step in reforming India’s financial regulatory architecture. Tabled in the Lok Sabha by the Union Finance Minister and referred to the Standing Committee on Finance, the Bill aims to consolidate, rationalise, and modernise securities market laws in line with India’s evolving, technology-driven capital markets.

By replacing multiple overlapping legislations with a single, principle-based framework, the Bill seeks to enhance investor protection, ease of doing business, regulatory clarity, and capital mobilisation.

Securities Market in India: Background

India’s securities market is a critical component of the financial system, enabling the transfer of savings into productive investments. It is:

• Highly technology-driven

• Central to capital formation and economic growth

• Regulated primarily by the Securities and Exchange Board of India (SEBI)

Over time, multiple laws governing securities led to regulatory overlaps, procedural complexity, and compliance burdens—necessitating a unified legal code.

Key Features of the Securities Markets Code Bill 2025

1. Consolidation of Securities Laws

The Bill repeals and replaces three major legislations:

• SEBI Act, 1992 – Established SEBI as the securities regulator

• Securities Contracts (Regulation) Act, 1956 (SCRA) – Regulated stock exchanges and securities contracts

• Depositories Act, 1996 – Enabled dematerialised holding and transfer of securities

Objective:
To eliminate duplication, remove obsolete provisions, and create a single, uniform securities law framework.

2. Expanded and Strengthened SEBI Board

• Board strength increased from 9 to 15 members

• Composition includes:

  • Chairperson

  • 2 Central Government nominees

  • 1 RBI nominee (ex-officio)

  • 11 other members (minimum 5 whole-time members)

Significance:
Enhances institutional capacity, regulatory expertise, and governance effectiveness.

3. Decriminalisation and Rationalisation of Offences

• Minor, technical, and procedural violations shifted to civil penalties

• Criminal liability restricted to serious offences such as:

  • Insider trading

  • Trading on material non-public information

Alignment:
Supports ease of doing business and reduces fear-driven compliance.

4. Classification of Contraventions

The Bill introduces a structured classification:

• Category I: Fraudulent and unfair trade practices

  • Civil penalties only

• Category II (Market Abuse): Serious violations affecting market integrity

  • Civil penalties + possible criminal liability

This distinction improves proportionality and legal certainty.

5. Time Limitation on Inspection

• No inspection permitted if 8 years have elapsed since the date of contravention

Benefit:
Provides closure, reduces regulatory uncertainty, and improves investor confidence.

6. Conflict of Interest and Accountability Provisions

• Mandatory disclosure of direct and indirect interests (including family interests)

• Compulsory recusal in case of conflict

• SEBI empowered to remove board members for non-compliance

Outcome:
Strengthens ethical governance and transparency.

7. Investor Protection Measures

• Mandatory Investor Charter to be issued by SEBI

• Statutory investor grievance redressal mechanism

• Directions to intermediaries and issuers to adopt similar safeguards

This reinforces trust, transparency, and retail investor participation.

8. Delegation and Regulatory Coordination

• SEBI empowered to delegate functions to:

  • Market Infrastructure Institutions (MIIs)

  • Self-Regulatory Organisations (SROs)

• Framework for inter-regulatory coordination

• Enables listing of “other regulated instruments” and platform interoperability

Relevance:
Supports market deepening, innovation, and fintech growth.

Key Challenges and Concerns

1. Concentration of Powers in SEBI

• Opposition raised concerns about excessive regulatory authority

• Risk of dilution of separation of powers

Way Forward:
Clear checks and balances and parliamentary oversight.

2. Subordinate Legislation Ambiguity

• SEBI regulations and circulars need transparency

• Risk of regulatory overreach through delegated legislation

Solution:
Consultative, accountable rule-making.

3. Enforcement Capacity

• Decriminalisation must not weaken deterrence

• Faster adjudication requires institutional capacity building

Conclusion

The Securities Markets Code Bill 2025 represents a landmark reform towards a simplified, coherent, and future-ready securities regulation regime in India. By adopting a principle-based approach, strengthening SEBI, and prioritising investor protection, the Bill aligns India’s capital markets with global best practices.

However, its success will ultimately depend on robust parliamentary scrutiny, transparent rule-making, effective checks on regulatory power, and strong institutional enforcement.

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