Centre tables bill in parliament to create single framework for securities

New Delhi: Union Finance Minister Nirmala Sitharaman on Thursday introduced the Securities Markets Code Bill, 2025 in the Lok Sabha that seeks to overhaul and consolidate the laws related to securities markets into a single framework from the current three different overlapping Acts.

The new Code seeks to rationalise and replace the three securities laws - Securities Contracts [Regulation] Act, 1956; Securities and Exchange Board of India Act, 1992; and Depositories Act, 1996.

After the introduction of the bill in the lower house of parliament, Sitharaman proposed to refer it to the Parliamentary Standing Committee of Finance for further scrutiny.

The Code proposes to expand the stock market regulator Securities and Exchange Board of India (SEBI) composition from the current 9 members to 15 members.

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.

The new regulation would empower SEBI to delegate some part of its registration function to market infrastructure institutions and self-regulatory organisations. It also has enabling provision for SEBI to establish a Regulatory Sandbox to facilitate innovation in financial products, contracts and services.

To ease compliance, the Code proposes converting minor criminal and procedural contraventions into civil penalties.

It has proposed to divide the contraventions into two separate categories. The first category of contraventions relate to violations of prohibition of fraudulent and unfair practices, which should not attract criminal liability. Contraventions that affect market integrity and public interest might be treated as a criminal offence, in addition to attracting civil penalties.

According to an official source, the intent of the Code is to provide a modern statutory framework for investor protection and capital mobilisation.

“A review of this scale in securities markets is happening for the first time, which will facilitate access to the investor and enhance capital mobilisation at a scale, commensurate with the emerging needs of the fast-growing Indian economy,” the source said.

The new code will replace the laws enacted decades ago. The three Acts have many overlapping and redundant provisions. The legislative architecture provided, therein, warranted a review and adaptation to evolving regulatory practices, latest developments in technology and changing character of markets growing in scale and complexity, the source added.  

The announcement in regards to consolidation and rationalisation of the securities laws were made in the Union Budget 2021.

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.

To enhance investment climate and market making, the Code provides an enabling framework for inter-regulatory coordination, wherein SEBI in consultation with other regulatory authority concerned may make regulations to enable a seamless process for listing of ‘other regulated instruments’ and to ensure better coordination among Market Infrastructure Institutions (MIIs) in terms of interoperability of any platform.