The Bill proposing the Securities Markets Code, 2025 (SMC) was tabled before the Lok Sabha on December 18, 2025, during the Winter Session of Parliament. A revamp of the existing Securities and Exchange Board of India Act, 1992 (SEBI AcT) has been much awaited, having first been spoken about in the Union Budget 2021–22 by Union Finance Minister Nirmala Sitharaman. The SMC has been referred to the Parliamentary Standing Committee on Finance for further scrutiny.

The idea of an SMC was birthed in the recommendations of the Financial Sector Legislative Reforms Commission, constituted in 2011 and led by Justice BN Srikrishna, as set out in its 2013 report. But like all modified laws, the SMC brings to us all the core ingredients of any refreshed legislation - cleaning up redundancies, repackaging the old, codifying lessons learnt, introducing the new and allowing a framework that will keep the securities market framework a living, breathing organism, capable of evolving with time.

The SMC is formulated almost like an all-encompassing basic structure, providing statutory sanctity to the SEBI's own housekeeping and internal architecture. It is the skeletal regulatory basis to supervise market intermediaries and infrastructure institutions, codify SEBI’s own role in dealmaking across public markets and, of course, govern the securities enforcement architecture and investor protection framework. It does so by replacing and consolidating the SEBI Act, 1992, along with the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. While it maintains the continuity of SEBI as the primary regulator (doing away with the unified financial regulator concept that rears its head now and then, in public discourse), it introduces significant structural and procedural shifts. These include increasing the Board composition to 15 from the existing 9 and introducing new definitions such as “securities market service providers”, “other regulated instruments”, etc.

With so much to compare and contrast, this article limits its focus on the key enforcement and adjudication changes that the SMC envisages.

With SEBI as the judge, jury and executioner, the SMC addresses a long-standing concern on how these different powers cohabit within the same organisation. It statutorily mandates that an arm's-length separation be maintained between SEBI’s investigative and enforcement divisions. While processes and internal business allocation rules have always existed within SEBI to avoid such conflict of interest, the SMC now specifically introduces a requirement disqualifying any person who is involved in an investigation from adjudication on the same matter. And by streamlining the scope of enforcement under the singular “adjudicating officer” concept, implementing this will be simpler as well.

Currently, the quasi-judicial system under the Board is a trifecta of procedures . One, show cause notices adjudicated upon by whole time members as representatives of the Board empowered to take action in investor interest, under Section 11B of the SEBI Act. Two, monetary penalties are adjudicated upon by an Adjudicating Officer (AO) for defaults under Chapter VIA of the SEBI Act (with an AO in the existing regime being someone who is not below the rank of a division chief). And three, violations of intermediaries regulations which are dealt with by the designated authority (being officers appointed by an executive director of SEBI and not below the rank of Division Chief).

The proposed Section 17 now unifies this structure under the common term of an adjudicating officer, who is empowered to issue show cause notices, adjudicate matters, disgorge illegal gains and take actions such as suspension of certifications as well as imposition of penalties. SEBI can designate its Chairperson or Whole-time Members (WTMs) to act as AOs, in addition to officers not below the rank of Division Chief. This allows the creation of a single cadre of adjudicators within SEBI, instead of the hierarchical WTM, AO and designated authority structure prevalent today. By creating a unified presence of an adjudicating officer, the SMC has taken a much-needed first step towards simplifying the enforcement structure and allowing for a framework that will have one single enforcement process, rather than the multiplicity that parties encounter today.

Bringing in a singular definition to enforcement is not mere semantics; it will reduce friction points to the extent of allowing for a promising virtuous multiplier effect. By setting consistent precedents, timely resolution of enforcement action, consolidating powers of adjudicators and allowing appeals to be heard more systematically by higher courts, the markets and court systems stand to benefit immensely.

The existing SEBI Act is silent on timelines applicable to quite a few key aspects of enforcement. This created a fair degree of uncertainty and ambiguity on what lies ahead, especially since ongoing investigations and proceedings do become disclosure items across businesses. However, the SMC now introduces some very helpful timelines. For investigations, there is now an outer limit of six months unless exigent circumstances require this limitation period to be waived in writing by a whole-time member. SEBI is specifically empowered to rope in experts or securities market service providers to assist with the investigation. 

However, SEBI now has the statutory ability to expressly direct the investigating team to do a further investigation (a power only implicitly embedded in the SEBI Act today) and formulate a supplementary report, which hopefully should be subject to the same timelines. Even in terms of limitation period, the default or contravention under question should not be older than 8 years, unless SEBI commences an investigation in public interest or takes on the baton based on reference from another regulatory agency.

Neatly tied into these timelines are those set for interim orders. For the first time, the hotly contested interim order brahmastra has been sequestered to 6 months, extendable only upon exercise of discretion to a maximum of 2 years. Such an extension is permissible upon review by a panel consisting of not more than three persons amongst the SEBI Chair and its WTMs. Section 27 of the SMC clearly articulates the pressing circumstances in which an interim order can be passed and requires the affected party to be given an opportunity to be heard even at the interim stage. This significantly reduces SEBI’s ability to do so “ex-parte” as it does currently. Where circumstances do not allow for a prior hearing, the reasons for not providing this right have to be recorded in writing, with a hearing to be provided soon after.

Bringing this within the bounds of statutory procedure allows for any extensions to be granted only if they meet a more objective test of reasonableness and necessity. It also creates a framework that makes the ex-parte nature of interim orders an exception, rather than the sine qua non. Thus, the order must contain justifications not only for the proposed interim intervention, but also on why such action must be ex-parte - two different metrics which are often conflated.

Both the SMC and the existing SEBI Act require the Securities Appellate Tribunal (SAT) to be a body consisting of a Presiding Officer and a number of judicial and technical members determined by the Central government. As is the case under the current law, even the proposed law contemplates the judicial member temporarily acting as the Presiding Officer in case of a vacancy. But the SMC also introduces another significant exception: in the absence of a technical member due to a vacancy, a coram may consist of only the Presiding Officer and a judicial member. However, circumstances where there is only a technical member have not been addressed.

Over the years, an important adjunct which has developed to the enforcement and adjudication mechanism before SEBI is that of settlement. It has emerged as an alternative mechanism to allow for resolution of enforcement action. Historically, the settlement process has been subject to constitutional challenges (including a petition filed in the Delhi High Court by Deepak Khosla) because it did not find roots in the statute, after which the SEBI Act was amended accordingly. The SMC considers the same provisions, but introduces more formalised procedures with a specific focus on voluntary disclosure and clearer rules for coordination with ongoing enforcement proceedings. The SMC allows parties seeking settlement to disclose “true and vital” information as part of their settlement proceedings as well, making this optically a more whistleblower style structure.

A quick read of the SMC clearly demonstrates a design intent to weed out many of the SEBI Act’s oft-noted criticisms as well as build from the lived experience since 1992. While constructing this plinth though, it would have been useful to see some statutory codification of overwrought issues such as evidence discovery and cross-examination rights as well as a more robust alternate dispute resolution mechanism. Of course, existing regulations will be amended, new ones will be brought in and one hopes a new generation of subsidiary instructions will reflect this blueprint effectively. 

Shruti Rajan is a Partner at Trilegal.