How India's Securities Markets Code, 2025, Will Reshape Compliance, Capital Raising And Cross Border Money

1. Background

The Securities Markets Code, 2025 (the “Code”), tabled in Parliament in December 2025, is the most significant recast of India's capital markets legislation since SEBI's creation in 1992. The Bill consolidates three core securities statutes, the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992 and the Depositories Act, 1996, into a single unified code, with some government securities provisions also being absorbed, replacing a patchwork of overlapping and sometimes inconsistent laws. The stated objectives are to simplify the legal architecture, strengthen investor protection, rationalise enforcement (with a clearer line between civil penalties and criminal liability), and align regulation with technology driven markets and India's ambition to attract larger cross border capital flows.

2. What The Code Does At A Structural Level

At a structural level, the Code “collapses” India's capital markets framework into a single statute governing primary and secondary markets, market intermediaries, depositories, market infrastructure institutions and, significantly, government securities. Instead of separate Acts with distinct definitional sections and enforcement tools, the Code provides one comprehensive set of definitions particularly a broadened definition of “securities” and a unified regime for authorisation, supervision and sanctioning of entities and activities across the securities ecosystem.

This consolidation is expected to reduce grey zones between listing rules, trading rules and depository operations, streamline interpretive disputes (for example, in areas such as derivatives versus spot delivery), and furnish SEBI and the government with a more coherent rule making platform.

3. Compliance (From Patchwork To Programmatic)

A. Unified Enforcement And Decriminalisation Of Minor Breaches

From a compliance standpoint, the Code represents both a centralisation of enforcement power and a moderation of sanctions for technical lapses. It gives SEBI clearer, and in some areas wider, statutory authority to supervise market intermediaries and market infrastructure institutions, while simultaneously decriminalising a range of minor or technical contraventions and shifting them to a civil penalty framework.

Adjudicating officers will be able to impose formula based monetary penalties such as per day or turnover linked fines, reducing the scope for discretionary criminal prosecutions in cases of delayed filings, inadvertent disclosure errors or low materiality compliance failures. Serious market abuse insider trading, fraudulent and unfair trade practices, market manipulation continues to attract stringent punitive consequences, including criminal liability, preserving the deterrent core of the regime while making day to day compliance more predictable and proportionate.

B. Licensing, Supervision And “Single‑Window” Compliance

The Code also pushes towards a more integrated licensing and supervision model for intermediaries and service providers. Commentary around the Bill indicates a move to rationalise multiple registrations including broker, depository participant, research analyst, investment adviser into a more unified authorisation framework, with centralised KYC and consolidated oversight of entities offering bundled services.

For large financial services groups and fintech platforms, this promises reduced duplication in licensing, renewal and audit processes, but it also means SEBI will have a more holistic view of group level risks, conflicts of interest and conduct issues that cut across silos. Compliance functions will need to evolve from rule specific checklists under different Acts to integrated, Code aligned compliance programmes that reflect a sharper distinction between administrative breaches (managed through structured penalties) and conduct risk events that can trigger investigations, disgorgement and criminal referrals.

C. Tech Ready Regulation And Data Obligations

The Code explicitly recognises modern trading and advisory practices, algorithmic and high frequency trading, AI‑driven research and robo‑advisory, digital platforms and evolving forms of market infrastructure and equips SEBI with express statutory hooks to regulate them. A more flexible definition of “securities” allows tokenised instruments and digital representations of value to be brought within the regulatory perimeter without repeated legislative amendments, which will be particularly relevant as Indian exchanges and depositories experiment with tokenisation and distributed ledger based settlement.

In practice, this means more granular obligations around system resilience, cyber security, algorithmic governance, conflict management and data retention for intermediaries and market infrastructure institutions, requiring compliance teams to work much more closely with technology and risk functions.

4. Capital Raising (Public, Private And Hybrid)

A. Streamlined Issuance And Listing Ecosystem

For issuers, the consolidation into a single Code is expected to simplify the capital raising journey from a regulatory mapping perspective. Prospectus requirements, listing conditions, continuous disclosure obligations and delisting provisions that were previously scattered across multiple statutes and delegated legislation are now anchored in one legislative spine, with SEBI's regulations layered on top.

The Code's emphasis on time bound enforcement and clear separation between investigative and adjudicatory functions should, if implemented well, reduce the perceived governance risk associated with regulatory inquiries into IPOs, QIPs or preferential issues, which often have a chilling effect on deal making even before any final orders are passed. Over time, a more predictable enforcement environment and a single statutory touchpoint for equity, debt and hybrid issuances could compress transaction timelines and reduce the friction cost of accessing public markets, particularly for repeat issuers.

B. Corporate Bonds, Government Securities And Market Depth

By absorbing government securities provisions and bringing G‑Secs and corporate bonds into a harmonised framework, the Code aims to deepen India's fixed income markets and strengthen the institutional architecture around trading, clearing and settlement. A unified regime for disclosure, reporting and market abuse surveillance across sovereign and corporate paper, if backed by robust implementation, can make Indian bond markets more transparent and investible for domestic institutions and foreign portfolio investors, particularly in the context of index inclusion and increased global allocation to Indian debt.

For corporates, a more integrated view of bond and equity markets under one Code could facilitate more sophisticated capital structure strategies using a mix of listed debt, convertibles, perpetual instruments and equity without having to navigate multiple statutory silos with overlapping and sometimes conflicting requirements.

C. SME, Startup And Fintech Capital Formation

The Code's decriminalisation of minor defaults, emphasis on ease of doing business and potential rationalisation of intermediary licensing also have implications for SME, startup and fintech capital raising. A clearer, more proportionate enforcement regime can lower the perceived regulatory risk for first time issuers and their investors, especially in sectors with complex related party structures or rapidly evolving business models where technical compliance errors are more likely.

Combined with tech ready provisions that recognise digital platforms and alternative investment structures, the Code is likely to support the continued growth of SME exchanges, alternative investment funds and innovative capital raising channels, although much will depend on how SEBI calibrates detailed regulations and sandbox frameworks under the new statutory umbrella.

5. Cross Border Money And Regulatory Diplomacy

A. Foreign Portfolio And Direct Investment

Cross border capital is acutely sensitive to legal certainty, enforcement quality and the coherence of regulatory mandates, and the Code is explicitly framed as part of India's effort to present a cleaner, more investor friendly capital markets regime to global investors. By consolidating core securities statutes and rationalising enforcement, the Code reduces interpretive fragmentation and gives foreign portfolio investors (FPIs) and foreign direct investors (FDI) a clearer baseline for assessing regulatory risk, particularly around disclosure standards, insider trading and market abuse enforcement, and the supervision of market infrastructure. The integration of government securities and corporate bonds under one code also aligns with India's push for deeper FPI participation in debt markets and fits with broader macro financial objectives such as inclusion in global bond indices and the development of a more liquid, transparent yield curve.

B. Offshore Listings, Depositary Receipts And Dual Listing Strategies

For Indian issuers contemplating offshore listings, depositary receipt programmes or dual listing structures, the Code's unified regime for “securities” and intermediaries can simplify the interface between Indian regulation and foreign listing rules. A single consolidated statute allows regulators and exchanges in other jurisdictions to more easily map Indian requirements against their own, potentially easing recognition and cooperation in areas such as disclosure, corporate governance and enforcement. At the same time, a stronger statutory base for SEBI's investigative and cross border cooperation powers particularly in relation to market abuse and information sharing may lead to more robust joint investigations with foreign regulators where misconduct spans markets, increasing the importance for global issuers and intermediaries of maintaining consistent compliance standards across jurisdictions.

C. Fintech, Tokenisation And Digital Asset Flows

The Code's technology neutral, forward looking drafting around “securities” and market infrastructure has clear implications for future cross border flows in tokenised and digital assets. By providing a flexible definitional hook to bring tokenised securities and similar digital instruments within the Code, the legislature has created a pathway for these products to be regulated as mainstream securities rather than in an ad‑hoc or purely enforcement driven manner. This, combined with explicit statutory recognition of algorithmic and electronic trading, opens the door for India to participate more actively in global experiments around digital asset issuance, tokenised bonds and cross border settlement solutions, provided that parallel regimes on foreign exchange, anti-money laundering and data localisation are appropriately aligned.

6. Investor Protection, Governance And Market Conduct

While the Code simplifies and modernises the regulatory framework, it also strengthens the investor protection spine. The Bill formally embeds an “investor charter”, codifies grievance redressal mechanisms, and revives a statutory SEBI ombudsperson, which had been discontinued earlier, thereby elevating protections that previously rested largely on regulations and administrative directions into primary legislation. These measures, if implemented credibly, should make rights and remedies clearer for retail and institutional investors alike, reduce the reliance on ad hoc interventions, and support the development of more rule bound, less personality driven regulatory governance. For issuers and intermediaries, this also means a more demanding environment on disclosure quality, conflict of interest management, board oversight and internal controls, particularly around market conduct, related party transactions and the integrity of financial and non-financial reporting.

7. Practical Takeaways For Compliance, Deal Teams And Boards

For compliance officers, the transition to the Code will require a comprehensive mapping exercise from old statutes to the new unified framework, re‑writing internal policies and control matrices and recalibrating risk rating models to reflect the sharper distinction between civil and criminal consequences. Deal teams like investment banks, in‑house capital markets counsel and law firms will need to re‑examine transaction structures, disclosure practices and deal timetables against the Code's consolidated provisions and SEBI's implementing regulations, particularly in areas such as issuer eligibility, continuous listing obligations, enforcement risk allocation and disclosure of emerging risks like algorithmic trading controls. Boards and senior management should view the Bill as an opportunity to move from reactive, rule compliance to more strategic, risk based governance of capital markets activity, aligning capital raising, cross border strategies and fintech initiatives with a statutory architecture that is more coherent, but also more demanding, than the patchwork it replaces.

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