Introduction of Securities Markets Code (SMC) Bill 2025

The SMC Bill 2025, introduced by Finance Minister, represents a significant overhaul of securities market regulations. It aims to consolidate three existing Acts into a unified regulation to streamline and modernize the legislative framework.

Key Objectives of the SMC Bill

• Consolidation and replacement of the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996.
• Creation of a principle-based legislative framework to reduce compliance burdens and remove redundant concepts.
• Improvement in regulatory certainty by separating SEBI's fact-finding functions from enforcement actions.

Structural Changes and Enhancements

• Expansion of SEBI's board to a maximum of 15 members, including the chairperson, from the current nine.
• Mandate for board members to disclose any direct or indirect interests during decision-making.
• Formal recognition of market infrastructure institutions such as stock exchanges and depositories, empowering them to frame bye-laws.

Procedural and Legal Revisions

• Introduction of timelines for investigations and interim orders.
• Decriminalization of certain procedural violations and imposition of civil penalties instead.
• More serious treatment of market abuse violations with civil penalties and potential criminal liability.

Challenges and Criticisms

• Concerns regarding prolonged uncertainty for regulated entities despite improved structure.
• Expanded discretionary powers for regulators, potentially limiting recourse for the aggrieved to approach SAT or courts.
• Calls for broader consultation and stakeholder engagement in the legislative process.

Significant Provisions

• Introduction of an ombudsperson to enhance investor protection and facilitate grievance resolution.
• Emphasis on transparency by requiring SEBI to consult stakeholders before implementing new rules.
• Prevention of conflicts of interest through mandatory interest declarations by SEBI members.

Expected Impact and Next Steps

The Bill has been referred to the Parliamentary Standing Committee on Finance, with a report expected in the next session of Parliament. The introduction marks a step toward greater regulatory modernization, though its success depends on the balanced exercise of expanded regulatory powers.