Finance Minister Nirmala Sitharaman introduced the Securities Markets Code Bill, 2025 in Parliament which could completely revolutionise how Securities Market work.
The Bill merges three legacy laws into one modern Code
- SEBI Act, 1992
- Depositories Act, 1996
- Securities Contracts (Regulation) Act, 1956
1) Why was this Code necessary?
Over the years:
- Amendments piled up
- Overlaps became routine
- Compliance turned fragmented and expensive
The Securities Markets Code (SMC) aims to
- Replace multiple Acts with one framework
- Remove outdated provisions
- Adopting a principle-based approach
For market participants, this means:
- Fewer grey areas
- Clearer obligations
- Easier navigation of the law
2) Emphasis on Public Consultation
One of the most important shifts is how rules will be made.
Under the Code:
- Public consultation becomes mandatory
- SEBI, exchanges, clearing corporations and depositories must seek feedback
- Even the Central Government must consult before issuing binding instructions
This marks a move away from top-down regulation.
It brings transparency.
3) SEBI’s role gets sharper
SEBI remains the anchor regulator.
Key changes:
- Board strength increases from 9 to up to 15 members
- Space for more domain experts
- Stricter conflict-of-interest disclosures
- Mandatory recusal where conflicts exist
The emphasis is to bring credibility, independence and public trust.
4) Faster enforcement, focused penalties
The enforcement framework is streamlined
What changes:
- A single adjudication mechanism
- Defined timelines for investigations
- Time-bound interim directions
Criminal liability is limited to:
- Serious market abuse
- Wilful defiance of SEBI orders
- Non-cooperation during investigations
Most violations move to civil penalties.
The intent is firm enforcement, without fear-based compliance.
5) Protection of Investor interests
The Code clearly sets out:
- Investor rights
- Service standards
- Duties of issuers and intermediaries
Grievance redressal improves with:
- A SEBI-led, time-bound system
- Appointment of an Ombudsperson
- Faster and more accountable resolution
6) What changes for market intermediaries ?
Stock exchanges, clearing corporations and depositories:
- Operate under one unified legal framework
- Follow standardised bye-laws
SEBI can also:
- Delegate functions to market institutions
- Recognise self-regulatory organisations
- Make regulation closer to market realities
7) The bigger picture
The Securities Markets Code, 2025 is not incremental reform.
It is a full rewrite.
If executed well:
- It can Improve ease of doing business
- Strengthen investor confidence
- Support capital mobilisation at scale
Above all, it signals a shift towards simpler laws, participative regulation and a more trusted market ecosystem.