What the Securities Markets Code Bill, 2025 means for SEBI, investors and market intermediaries

The introduction of the Securities Markets Code Bill, 2025 in Parliament marks one of the most significant rewrites of India’s capital market laws in decades. By folding three major statutes into a single, principle-based code, the government aims to modernise regulation for technology-driven markets. But the Bill has also revived an old debate: how much power should India’s market regulator wield, and who watches the watchdog?

What the Securities Markets Code Bill seeks to do

Tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha, the Bill proposes to merge the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996 into a single Securities Markets Code. The stated objective is to eliminate legal overlaps, reduce complexity, and align regulation with rapidly evolving financial markets dominated by electronic trading, complex products, and new intermediaries.

The government has argued that the existing framework, built incrementally over decades, no longer reflects the realities of modern capital markets. The Bill has now been referred to the parliamentary standing committee on finance for detailed scrutiny.

How the Bill reshapes SEBI’s powers and structure

At the heart of the reform is the expansion of authority for the Securities and Exchange Board of India. The Bill increases SEBI’s board strength from nine to 15 members, adding more whole-time members and representatives from the Union government and the Reserve Bank of India.

It also tightens conflict-of-interest norms by extending disclosure requirements to family interests of board members. In parallel, the Code introduces clearer classification of violations — decriminalising minor contraventions through civil penalties, while reserving criminal action for serious market abuse. Time limits for investigations and interim orders are meant to address long-standing complaints about prolonged enforcement actions that leave firms and individuals in limbo.

What changes for investors

Investor protection, which until now rested largely on regulations and administrative directions, is given explicit statutory backing under the Code. The Bill formally incorporates an investor charter, mandates standardised grievance redressal mechanisms, and reintroduces the SEBI ombudsperson — an institution that was discontinued in 2023.

For investors, this promises clearer rights and a more structured path for resolving complaints. Supporters argue that statutory recognition strengthens enforceability and signals a shift from discretionary protection to rule-based safeguards.

Why accountability concerns have resurfaced

Despite these changes, critics argue that the Bill strengthens SEBI’s powers far more than its accountability. Unlike major reforms in other sectors, the Code was introduced without a prior white paper, draft consultation, or explanatory note. This absence of public debate has unsettled market participants, especially in light of past controversies involving alleged conflicts of interest within the regulator.

Opposition leaders, including Arun Nehru of the DMK and Congress MP Manish Tewari, flagged concerns in Parliament that the Code risks concentrating excessive authority in a single regulator. While the finance minister said these issues could be examined by the standing committee, the episode has underlined unease about checks and balances.

The question of regulatory capacity

Another unresolved issue is whether SEBI has the institutional depth to wield its expanded powers effectively. Market experts caution that stronger laws alone cannot substitute for skilled manpower, specialised expertise, and internal governance reform. Without parallel investment in capacity-building, enforcement risks becoming uneven — either overbearing in some cases or ineffective in others.

This concern is not theoretical. Past episodes of market stress have exposed gaps in coordination and oversight, including fragmented regulation of key infrastructure institutions such as National Securities Depository Ltd. Critics argue that consolidation of laws must be matched by consolidation of regulatory accountability.

What happens next

Much now depends on the parliamentary standing committee’s review. The committee process could open the door to stakeholder consultations, clarifications on transitional provisions, and possible safeguards to strengthen oversight of the regulator itself.

Proponents within the Union ministry of finance maintain that a single, coherent code will reduce duplication, improve legal clarity, and make India’s markets more attractive to global capital. Skeptics counter that without stronger transparency, parliamentary scrutiny, and independent oversight of SEBI, the reform may concentrate power without fully restoring investor confidence.

The final shape of the Securities Markets Code Bill, 2025 will therefore determine not just how markets are regulated, but how regulatory power itself is balanced — an issue that will influence India’s financial architecture for decades.