Securities Markets Code Bill 2025 to strengthen investor protection, boost capital mobilisation: Sources

After finance minister Nirmala Sitharaman tabled the Securities Markets Code Bill 2025 in Lok Sabha on Thursday for consolidation of laws related to the securities markets, sources pointed out that a need was felt for a “modern statutory framework for investor protection and capital mobilisation”.

Securities Markets Code, 2025 aims to consolidate, rationalise and replace the three Securities laws - Securities Contracts (Regulation) Act, 1956, Securities and Exchange Board of India Act, 1992 and Depositories Act, 1996.

“A need was felt to provide a modern statutory framework for investor protection and capital mobilisation. It was felt that by enabling participatory approach and consultative regulation making, we also intend to create more awareness and draw in more new participants,” said sources.

Source said the code is a major milestone as a review of this scale in securities markets laws is happening for the first time. “It will facilitate access to the investor and enhance capital mobilisation at a scale, commensurate with the emerging needs of the fast-growing Indian economy,” sourced pointed out.

The aforementioned laws were framed decades ago and may have many overlapping and redundant provisions, which the ministry seeks to correct through the bill.  “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,” sources pointed out.  It may be noted that the ministry of finance in Budget 2021 announced to consolidate and rationalize these Acts into a single securities markets code.

SMC Bill, 2025: Key Features

Sources pointed out that 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. “This will promote Ease of Doing-Business,” they pointed out.

“The language of the Code has been simplified to omit redundant concepts, remove the duplication of provisions and incorporate consistent regulatory procedures for standard processes, to ensure a uniform and streamlined framework of securities laws,” sources pointed out. The code also seeks to strengthen the regulatory mechanism of the ‘Board’ by expanding the board up to 15 members (from existing 9 members, including Chairperson) providing a transparent and consultative process for issuing any subordinate legislation, said sources. Additionally, the members of the ‘Board’ will have to disclose any ‘direct or indirect’ interest while participating in decision-making.

“The Code maintains an arm’s length separation between fact finding process such as inspection or investigation and adjudication proceedings. It further, lays down timelines for investigations and interim orders for a time-bound completion of the enforcement process. This will provide clarity and certainty on the regulatory action to the market participants,” sourced pointed out.

“The Code further seeks to strengthen investor protection, promote investor education and awareness, and ensure effective and time-bound redressal of investor grievances. It also enables an Ombudsperson mechanism for redressal of grievances,” sources said.