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The Indian securities landscape is undergoing its most significant regulatory transformation in 3 (three) decades with the introduction of the draft Bill on the Securities Markets Code, 2025 ("SMC") in the Lok Sabha.1 The SMC bill aims to consolidate and amend the Securities Exchange Board of India Act, 1992 ("SEBI Act"), the Securities Contracts (Regulation) Act, 1956 ("SCRA"), and the Depositories Act, 1996 ("Depositories Act").
The SMC too, appears to be one among what is now an increasingly long line of legislative rationalisation and modernisation efforts undertaken by the Central Government in recent years following the consolidation and codification of criminal and labour laws. The journey towards this unified framework began in 2021, when the Union Budget first proposed the creation of a single securities market code by merging the 3 (three) above-mentioned statutes.2 The intention of this exercise appears to unify existing foundational securities laws and to reduce overlapping provisions that have accumulated over years of piecemeal amendments. The SMC is contemplated as a principle based legislative framework to reduce compliance burden, improve regulatory governance and enhance dynamism of the technology driven securities markets.3
The SMC also attempts to make several amendments to the provisions of the SEBI Act, the Depositories Act and the SCRA which are being merged into one and aims modernise securities laws by introducing (or rather re-introducing) elements such as regulatory sandbox and ombudsperson into the primary legislation itself – placing investor protection and innovation at the forefront.
It is important to note that this bill is currently in its nascent stages i.e., the Central Government has only recently introduced it in the Lok Sabha, expecting the SMC to undergo scrutiny, debate and consequent changes.4 As on date, the SMC has been referred to the Parliamentary Standing Committee on Finance,5 and the Department of Economic Affairs, Ministry of Finance is scheduled to provide an initial briefing the Parliamentary Standing Committee on the SMC on January 08, 2026.6 That being said, the key highlights of the SMC (as it stands today) and a brief comparison with the extant law have been captured in the table below:
| Sl. No. | Type of Change | New Provision (SMC) | Old Provision (SEBI Act/ SCRA / Depositories Act) |
| 1. | Expanded Board | Strength of the Securities and Exchange Board of India ("Board") has been increased to 15 (fifteen) members with 9 (nine) non-ex-officio members out of whom at least 5 (five) are to be whole time members.1 | The current Board consists of 9 (nine) members with 5 (five) non-ex-officio members out of whom at least 3 (three) are whole time members.2 |
| 2. | Transparency- Expanded Conflict Disclosure | The disclosure required to be made by Board members includes 'direct / indirect' interest of family members.3 | The disclosure requirement by Board members is limited to members' own 'pecuniary interest'.4 |
| 3. | Investor Rights | Chapter X of the SMC lays down the enabling provisions for the Board to formulate an Investor Charter which are to be based on the principles for protection of investors and facilitation of participation.5 | Investor charter exists under policy / circular / intermediary-specific secondary legislation. |
| 4. | Independent Ombudsperson | Statutory officer for grievance redressal i.e., the concept of ombudsperson has been reintroduced.6 | Grievance redressal is handled internally by SEBI (through SCORES). The concept of a SEBI Ombudsperson was previously repealed in 2023.7 |
| 5. | Limitation Period for investigations and inspections | A limitation period on initiation of investigations/inspections has been introduced. The Board may initiate an investigation or inspection only within 8 (eight) years of default (unless such default has a systemic impact on the securities markets).8 | No statutory time-limit / limitation period for initiating investigations. |
| 6. | Speedy Justice | The SMC mandates that every investigation must be completed within 180 (one-hundred and eighty) days.9 | There is no fixed timeline for completion of investigation.10 |
| 7. | Due Process | The Board has been empowered to issue interim orders pending inspection or post the completion of inspection. Such interim orders are intended to expire in 180 (one hundred and eighty) days unless extended by the designated whole-time member of the Board.11 | Interim orders have not been contemplated under the SEBI Act. The Board may currently pass general or special orders for certain specified purposes.12 |
| 8. | Rationalisation of offences | Technical / procedural lapses have been rationalised to civil offences punished with fines. Imprisonment is reserved only for severe offences (such as market abuse, non-compliance with interim / final orders of SEBI).13 | Imprisonment of up to 10 (ten) years may be imposed as a penalty on offenders over and above any fines levied for offences under the SEBI Act.14 |
| 9. | Prohibition of Fraudulent or Unfair Practices and Market Abuse | The SMC lists out and prohibits practices which constitute 'Fraudulent or Unfair Practices' and 'Market Abuse.'15 | - |
| 10. | Regulatory Sandbox |
Legal framework to establish a regulatory sandbox for the development of new products, contracts, or services in the securities markets has been codified in the SMC.16 |
Currently, regulatory sandbox has been captured in specific circulars and secondary legislations issued by the Board.17 |
From a review of the SMC, it appears that despite the structural overhaul, there are no radical departure from current legal positions. There appears to be strong emphasis on ensuring continuity of regulation in the interest of market stability, while increasing efficiency and transparency. In this context, it is important to note that, the SMC ensures that any rules, regulations, or guidelines issued by the Board or issued in furtherance of the 3 (three) consolidated statutes will remain in force (even once the SMC comes into force).1
These remain early days, and the manner in which the SMC ultimately evolves through the legislative process remains to be seen. We are closely tracking developments relating to the SMC as the legislative process unfolds.
Footnotes
1 https://sansad.in/ls/legislation/bills
2 https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1693901®=3⟨=2
3 Paragraph 3 of the Statement of Objects and Reasons of the SMC.
5 https://sansad.in/ls/committee/subjects-reports
7 Section 4 of the SMC.
8 Section 4 of SEBI Act.
9 Section 8 of the SMC.
10 Section 7A of SEBI Act.
11 Section 71 of the SMC.
12 Section 73 of the SMC.
14 Section 16 (1) of the SMC.
15 Section 13 (2) of the SMC.
16 Section 11C of SEBI Act.
17 Section 27 (3) of the SMC.
18 Section 11 (4) and 11AA of SEBI Act.
19 Section 97-109 of the SMC.
20 Section 24 of SEBI Act.
21 Chapter XII of the SMC.
22 Section 128, SMC.
23 https://www.sebi.gov.in/legal/circulars/nov-2021/framework-for-regulatory-sandbox_53982.html
24 Section 152 of the SMC.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
