December 2025 saw the tabling of the Securities Markets Code Bill, 2025, in Parliament by Finance Minister Nirmala Sitharaman. The Bill proposes to repeal and consolidate three cornerstone legislations; the Securities Contracts (Regulation) Act, 1956 (SCRA), the SEBI Act, 1992, and the Depositories Act, 1996, into a unified statute.
This initiative is not merely a legislative housekeeping exercise. It represents a structural reordering of India’s securities law regime, aimed at simplifying compliance, strengthening enforcement, and modernising oversight in line with global best practices.
India’s securities laws were enacted at different points in time, each responding to the needs of its era:
SCRA, 1956: Regulated stock exchanges and securities contracts in the formative years of India’s capital markets.
SEBI Act, 1992: Established the Securities and Exchange Board of India (SEBI) as the regulator, following liberalisation and the need for investor protection.
Depositories Act, 1996: Introduced a framework for electronic holding and transfer of securities, reflecting the shift to dematerialisation.
Together, these statutes created a fragmented regulatory landscape. Overlapping provisions, multiple compliance requirements, and interpretational ambiguities often burdened issuers and intermediaries.
The Securities Markets Code, 2025, seeks to address these challenges by harmonising provisions into a principle-based framework.
The proposed Code introduces several notable reforms:
Enhanced SEBI powers, including sharper definitions of its role and oversight responsibilities.
Decriminalisation of minor lapses, replacing criminal sanctions with administrative penalties for procedural defaults.
Introduction of an Ombudsperson system to provide a structured grievance redressal mechanism.
Streamlined adjudication processes for market abuse cases, reducing delays.
Restitution mechanisms, directing disgorgement amounts toward affected investors with an order of priority and conditions.
Conflict‑of‑interest disclosures mandating disclosure of direct and indirect interests by decision‑makers.
Expansion of SEBI’s Board to 15 members, allowing broader representation.
India’s move mirrors international trends in securities regulation:
United States: The Securities Exchange Act of 1934 consolidated oversight under the SEC, creating a single regulator for capital markets.
European Union: The Markets in Financial Instruments Directive (MiFID II) harmonises securities regulation across member states.
Singapore: The Securities and Futures Act provides a unified framework for capital markets, balancing investor protection with innovation.
By consolidating its statutes, India positions itself alongside jurisdictions that have embraced principle-based, unified codes to reduce fragmentation and enhance investor confidence.
The Securities Markets Code, 2025, offers several potential advantages:
Clarity for issuers: IPOs and capital raising will benefit from reduced compliance complexity.
Investor confidence: Stronger grievance redressal and restitution mechanisms enhance trust.
Regulatory efficiency: A single statute reduces interpretational disputes and accelerates enforcement.
Global competitiveness: Harmonisation with international standards may attract greater foreign investment.
Ease of doing business: Decriminalisation of minor lapses reduces the fear of disproportionate sanctions.
Eight‑year outer limit for initiation of investigation: The Code introduces an express eight-year outer limit for directing inspections or investigations from the date of default, subject to limited carve-outs for agency-referred matters and cases involving systemic market impact. This codifies judicial principles of reasonable period and laches previously applied by courts and the Securities Appellate Tribunal to regulatory delay. However, the breadth of the exceptions and the computation framework leaves scope for disputes on trigger dates, continuing contraventions, and transitional application.
Despite its promise, the Code has drawn scrutiny:
Concentration of regulatory power: Expanded SEBI authority without commensurate accountability measures risks imbalance.
Implementation hurdles: Transitioning from three statutes to one unified code will require extensive subordinate legislation and capacity building.
Stakeholder concerns: Market participants worry about interpretational gaps during the transition phase.
Judicial oversight: Questions remain about the role of the Securities Appellate Tribunal and courts in balancing SEBI’s expanded powers.
Stricter Penalties: The code proposes to introduce stricter penalties in comparison to the current provisions in force, with the highest penalty now amounting to one hundred crores for certain offences.
Expanded Powers of the Adjudicating Officer: The Adjudicating Officer’s powers have been broadened without a clear outlining of the hierarchy. Some of the new powers include the power of disgorgement and restitution, the power to pass cease and desist instructions and the power to pass directions.
Unclear Prospective Application: The Code does not expressly clarify whether its enhanced penalties and remedial powers apply prospectively. In light of increased penalty ceilings and expanded disgorgement and restitution powers, this omission raises concerns about their invocation in ongoing or pre-Code proceedings and the risk of retrospective application in substance.
The Securities Appellate Tribunal (SAT) has historically played a critical role in balancing SEBI’s enforcement powers. Cases such as Sterlite Industries v. SEBI (2001) and Price Waterhouse v. SEBI (2010) illustrate the tension between regulatory authority and due process. With SEBI’s powers set to expand under the Code, the jurisprudential question is whether SAT’s role will be strengthened or diluted.
Comparative jurisprudence offers lessons: in the United States, judicial review of SEC actions has been a cornerstone of accountability, while in the EU, MiFID II embeds procedural safeguards to balance regulatory discretion. India’s Code must similarly ensure that expanded powers are matched by robust checks and balances.
From a practitioner’s standpoint, the Code represents both opportunity and responsibility.
Capital markets advisory: IPOs and restructuring mandates must now be framed to highlight compliance advantages under the new Code.
Governance and disclosure: Mandatory conflict‑of‑interest disclosures will require boards and decision‑makers to adopt more rigorous governance practices.
Investor protection: Restitution mechanisms create new obligations for intermediaries and issuers, requiring careful structuring of compliance frameworks.
Cross-border restructuring: Harmonisation with global standards opens avenues for foreign participation, but also demands alignment with international disclosure norms.
Succession and corporate advisory: The Code’s emphasis on transparency and accountability will influence succession planning and corporate governance strategies.
Litigation strategies: For litigators, this unified Code reduces room for jurisdictional and ultra vires challenges rooted in fragmented statutes, and urges toward managing cumulative and perhaps simultaneous assessment of remedies, proportionality of penalties, sequencing of proceedings, and coordinated defence across regulatory, appellate, recovery, and, in limited cases, criminal fora.
These are domains where legal practitioners must provide not only compliance guidance but also strategic foresight. The Code is not just a consolidation of statutes; it is a recalibration of the relationship between regulators, issuers, and investors.
The Code must be viewed in the context of India’s evolving capital markets:
IPO activity: With record listings in 2024–25, clarity in regulation is critical for sustaining momentum.
Technology and innovation: Digital platforms, algorithmic trading, and fintech participation demand adaptable regulation.
Cross-border capital flows: Harmonisation with global standards is essential for attracting foreign institutional investors.
Investor protection: Restitution mechanisms and grievance redressal systems reflect a shift toward investor-centric regulation.
As 2025 concludes, the Securities Markets Code stands out as a milestone in India’s capital markets journey. By consolidating fragmented statutes, streamlining adjudication, and embedding investor protection, it lays the foundation for a more transparent, efficient, and globally competitive securities ecosystem.
Yet, its success will depend on balanced implementation, ensuring SEBI’s expanded powers are matched by accountability, and that issuers and investors alike experience the promised clarity and efficiency.
For the legal community, the Code is both a challenge and an opportunity: to interpret, advise, and shape the future of India’s securities regulation. As India steps into 2026, the Securities Markets Code will remain a defining reference point for practitioners, policymakers, and market participants navigating the evolving landscape of capital markets.
About the author: Akshaya Bhansali is the Managing Partner of Mindspright Legal.
Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.
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