Prelims: Current events of national and international relations | Economy
Why in News?
In a major overhaul of the Indian securities market regulations, the Securities Markets Code (SMC), 2025 was tabled in Parliament.
- Aim – To strengthen investor protection, streamline compliance, and enhance the Securities and Exchange Board of India (SEBI)’s regulatory powers.
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Key Provisions of the bill
- Consolidation of Laws – It replaces and merges 3 existing securities laws and creates a unified legal framework for securities regulation –
- Securities Contracts (Regulation) Act, 1956 (SCRA),
- SEBI Act, 1992, and
- Depositories Act, 1996.
- Composition – The Board strength increased from 9 to 15 members for better governance.
- Enhanced Powers for SEBI – SEBI gains stronger oversight over Market Infrastructure Institutions (MIIs) like stock exchanges and depositories.
- Delegation of Functions – SEBI can delegate parts of its registration work to MIIs and Self-Regulatory Organisations (SROs).
- Disclosure of ‘conflict of interest’ – If a SEBI board member (or their family) has any direct or indirect interest in a matter, they must declare it and stay out of the decision-making on that issue.
- Categories of Contraventions –
- Fraudulent & Unfair Practices - Minor violations (like unfair trade practices). It only attracts civil penalties but not criminal liability.
- Market Abuse – It is a grave violation that harms market integrity and public interest, attracts civil penalties, and may also be treated as a criminal offence.
- Investor Protection
- SEBI will create an Investor Charter to safeguard investors and encourage participation.
- SEBI will set up an Investor Grievance Redressal Mechanism.
- Securities Markets Service Providers (SMSPs) & issuers must also establish similar grievance mechanisms.
- SEBI can appoint Ombudsperson(s) from its officers to handle investor complaints fairly and within a fixed time frame.
- International practice – It brings in global standards for governance, accountability, and transparency & introduces regulatory impact assessment to measure the effects of new rules.
Comparison between the Old Framework & the New Bill
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Aspect
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Old Framework (3 Act)
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New SMC Bill, 2025
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Number of Laws
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3 separate acts
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1 consolidated act
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Regulator Powers
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Fragmented, limited in scope
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Expanded SEBI powers, unified oversight
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Composition
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9 members
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15 members (11 govt-appointed, min. 5 whole-time)
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Investigation & Adjudication
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Any person can be appointed
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Only the SEBI Chairperson, members, officers, and adjudicators must be independent
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Investor Protection
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No investor charter
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Mandatory Investor Charter, Ombudsperson for grievance redressal
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Compliance
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Criminal liability for minor lapses
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Decriminalisation of minor lapses, civil penalties only
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Reference
Indian Express | Securities Markets Code Bill, 2025
