Understanding the Securities Markets Code Bill 2025

Securities Markets Code Bill 2025: Latest Updates

The Union Finance Minister recently introduced the Securities Markets Code Bill 2025 in the Lok Sabha, fulfilling an earlier commitment made during the Union Budget 2021–22. This Bill is now under the scrutiny of the Standing Committee on Finance for a detailed evaluation. Its primary aim is to consolidate, rationalize, and modernize India's securities market laws, enhancing investor protection, facilitating ease of doing business, and promoting capital mobilization in a technology-driven financial ecosystem.

The Importance of Securities Markets in India

The securities market plays a crucial role in the Indian financial system by enabling the flow of capital from savers to those who require funds for productive investments. This sophisticated, technology-driven ecosystem is primarily regulated by the Securities and Exchange Board of India (SEBI).

Core Features of the Securities Markets Code Bill 2025

• Consolidation of Securities Laws: This Bill aims to replace three key legislations: the Securities Contracts (Regulation) Act (SCRA) of 1956, the SEBI Act of 1992, and the Depositories Act of 1996. The objective is to eliminate overlaps, duplicates, and outdated provisions to create a unified framework.
• Expanded SEBI Board: The Bill proposes to increase the SEBI board's strength from 9 to 15 members, enhancing regulatory governance and institutional capacity.
• Decriminalization of Minor Offences: Minor procedural and technical violations will now face civil penalties instead of criminal punishment, while serious offences like insider trading will remain criminal.
• Classification of Contraventions: Different categories of violations are defined, with serious market abuses potentially attracting both civil penalties and criminal liability.
• Time Limitation on Inspection: No inspections will occur if 8 years have passed since the date of contravention, ensuring legal certainty.
• Accountability Measures: Mandatory disclosures regarding conflicts of interest will be enforced, with SEBI empowered to remove board members for non-compliance.
• Investor Protection: SEBI is required to establish an investor charter and grievance redressal mechanisms, reinforcing trust and encouraging retail participation.
• Regulatory Delegation: SEBI can delegate certain functions to Market Infrastructure Institutions (MIIs) and Self-Regulatory Organizations (SROs), promoting innovation and market depth.

Key Challenges and Future Considerations

Opposition concerns include the concentration of powers within SEBI and potential violations of the principle of separation of powers. The government has acknowledged these issues, suggesting they can be addressed by the Standing Committee on Finance. Balancing effective enforcement with accountability, as well as ensuring a transparent rule-making process, will be essential for the Bill's success.

Conclusion

The Securities Markets Code Bill 2025 represents a significant structural reform aimed at fostering a coherent and future-ready regulatory framework for securities in India. Its effectiveness will ultimately depend on rigorous parliamentary oversight, transparent legislation, and institutional safeguards against regulatory overreach.

Frequently Asked Questions (FAQs)

Q1. What is the primary purpose of the Securities Markets Code Bill 2025?
Answer: The Bill aims to consolidate and modernize India's securities market laws to enhance investor protection, ease business operations, and facilitate capital mobilization in a technology-driven environment.

Q2. Which laws does the Securities Markets Code Bill 2025 replace?
Answer: The Bill replaces three major laws: the Securities Contracts (Regulation) Act, the SEBI Act, and the Depositories Act, creating a unified securities law framework.

Q3. How does the Bill improve SEBI's governance structure?
Answer: The Bill increases the SEBI board's strength from 9 to 15 members, enhancing regulatory governance and institutional capacity.

Q4. What measures does the Bill implement for investor protection?
Answer: It mandates SEBI to establish an investor charter and grievance redressal mechanisms to strengthen trust and promote retail participation in the market.

Q5. What challenges does the Bill face?
Answer: Concerns include the concentration of powers within SEBI and ensuring a transparent rule-making process, which may lead to regulatory overreach.

UPSC Practice MCQs

Question 1: What does the Securities Markets Code Bill 2025 aim to achieve?
A) Increase taxation on securities
B) Consolidate and modernize securities market laws
C) Strengthen physical securities holdings
D) Limit investor participation
Correct Answer: B

Question 2: Which Act is NOT replaced by the Securities Markets Code Bill 2025?
A) Securities Contracts (Regulation) Act
B) SEBI Act
C) Depositories Act
D) Companies Act
Correct Answer: D

Question 3: How many members will the SEBI board have after the Bill's implementation?
A) 9 members
B) 12 members
C) 15 members
D) 20 members
Correct Answer: C

Question 4: What is a potential consequence of minor violations under the Bill?
A) Criminal charges
B) Civil penalties
C) Immediate suspension
D) Market closure
Correct Answer: B