Securities Market Code Bill, 2025: Unifying India’s Securities Market Regulation

Context

In December 2025, the Union Finance Minister Nirmala Sitharaman tabled the Securities Market Code Bill, 2025 in the Lok Sabha. The Bill seeks to unify and modernise securities market laws and has been referred to the Standing Committee on Finance for detailed examination.

What is the Securities Market Code Bill, 2025?

1. The Bill aims to consolidate three major laws governing India’s securities market: Securities Contracts (Regulation) Act, 1956, SEBI Act, 1992 and Depositories Act, 1996.
2. The proposal was first announced in the Union Budget 2021-22.
3. The objective is to rationalise, simplify, and modernise the regulatory framework.
4. The Bill seeks to create a principle-based, technology-friendly code that supports:
   1. Investor protection
   2. Capital mobilisation at scale
   3. Faster adjudication
   4. Ease of doing business
5. It removes obsolete and redundant provisions, eliminates duplication, and ensures uniform regulatory procedures across securities laws.

Why Was the Bill Needed?

1. India’s securities market laws had overlapping provisions, leading to complexity and compliance burden.
2. Separate Acts resulted in fragmented regulation and slower enforcement.
3. A growing, technology-driven market requires modern, flexible, and principle-based regulation.
4. There was a need to balance strict regulation with ease of doing business, without weakening investor protection.

How the Securities Market Code Bill Proposes to Reform the System?

1. Unification of Securities Laws
   1. By merging three laws into a single code, the Bill creates a streamlined and coherent legal framework.
   2. This reduces confusion, duplication, and regulatory arbitrage.
2. Changes in SEBI’s Composition and Governance
   15. The Bill proposes to increase the number of members in the Securities and Exchange Board of India from 9 to 15.
   16. The Board will include:
       1. A Chairperson
       2. Two Central Government officials (ex-officio)

• One representative from the Reserve Bank of India (ex-officio)

1. 11 other members, of whom at least five must be whole-time members

1. Currently, SEBI has only three whole-time members.
2. The Bill also mandates disclosure of direct or indirect interests by Board members to avoid conflicts of interest.

3. Decriminalisation of Minor Offences
   1. Violations of a minor, procedural, or technical nature will be shifted from criminal prosecution to civil penalties.
   2. This aims to:
      1. Reduce compliance burden
      2. Improve ease of doing business

• Focus criminal punishment only on serious offences

1. Criminal liability will remain for serious violations such as:
   1. Insider trading
   2. Trading while in possession of material, non-public information
2. The Bill also brings “unlawful gains or losses” under civil penalties.

4. Limitation on Inspections
   1. No inspection can be initiated if eight years have passed since the date of contravention.
   2. This provides certainty and closure for market participants.
5. Faster and More Effective Adjudication
   1. The Bill seeks to balance speedy enforcement with adequate deterrence.
   2. Experts have noted that the changes aim to align regulatory efficiency with fairness.

Concerns Raised During Introduction

1. Some Members of Parliament argued that the Bill gives excessive powers to a single regulator, raising concerns over the principle of separation of powers.
2. The Finance Minister clarified that such concerns would be examined by the Standing Committee on Finance.
3. The presiding officer noted that referring Bills to Parliamentary Committees is within the Speaker’s authority.

Implications of the Bill

1. Creates a uniform and modern securities market framework.
2. Improves investor confidence through clearer rules and governance standards.
3. Reduces regulatory complexity and compliance costs.
4. Encourages capital mobilisation and market growth.
5. Strengthens India’s position as a technology-driven financial market.

Challenges and Way Forward

Conclusion

The Securities Market Code Bill, 2025 marks a major step toward simplifying, modernising, and strengthening India’s securities market regulation. With careful scrutiny and balanced implementation, it can enhance investor protection while supporting market growth and ease of doing business.