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Finance Minister Nirmala Sitharaman on Thursday tabled the Securities Markets Code, 2025, in the Lok Sabha to consolidate and amend the laws relating to the securities markets.

The Bill seeks to simplify the Indian securities markets laws, replacing three decades-old Acts — the SEBI Act, 1992, the Depositories Act, 1996, and the Securities Contracts (Regulation) Act, 1956 — and proposing a single legislative framework.

The Securities Markets Code, 2025 also seeks to provide a “modern regulatory framework” that will prioritise investor protection and capital mobilisation “at a scale commensurate with the emerging needs of the fast-growing Indian economy”.

Sitharaman further proposed that the Bill be sent to the Parliamentary Standing Committee on Finance for a review.

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

Transparency and consultation at Sebi has been emphasised in the draft legislation. In particular, it read: "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." Further, it emphasized "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".

In a boost towards ease of doing business, certain minor, procedural and technical contraventions have been decriminalized in the Code clubbing them under civil penalties. "The civil penalties are anchored to unlawful gains or losses caused with a view to ensure 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."

Still, punitive measures for market abuse remain to deter persons from committing crime that compromise integrity of the markets, the Bill noted.

The Code also flagged mechanisms designed to support technology experiments in the markets. It "enables the Board to establish a Regulatory Sandbox to facilitate innovation in financial products, contracts and services". Reflecting the nature of new instruments that transcend different regulatory jurisdictions, the legislation mentioned "an enabling framework is established for the inter-regulatory coordination of other regulated instruments to facilitate a seamless process for listing of such instruments".

(More to come…)

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