Securities Market Code Bill Aims to Strengthen SEBI

Why in the News?

The Securities Market Code (SMC) Bill, 2025 was introduced in the Lok Sabha, proposing to consolidate key securities laws, expand the SEBI Board, tighten conflict-of-interest norms, decriminalise minor offences, and enhance investor protection in India’s capital markets. This comprehensive approach to financial regulation draws parallels to the evolution of environmental jurisprudence in recent years.

Key Provisions and Regulatory Reforms under SMC Bill:

• The Securities Market Code, 2025 seeks to consolidate three major laws: the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996, creating a unified legal framework. This consolidation aims to streamline regulations, similar to how environmental clearances have been streamlined in recent years.
• The Bill significantly enhances SEBI’s powers, including authority to remove a Board member for non-compliance or if they acquire interests prejudicial to official duties. This strengthening of regulatory authority is reminiscent of efforts to bolster environmental impact assessment processes.
• It introduces stricter conflict-of-interest disclosure norms, mandating Board members to disclose direct and indirect financial interests, including those of family members, and to recuse themselves where conflicts arise. This focus on transparency aligns with principles of environmental democracy.
• The proposed code mandates SEBI to specify an Investor Charter, aimed at safeguarding investor rights, improving transparency, and encouraging wider market participation. This charter could potentially include considerations for environmentally responsible investing, promoting a pollution free environment in the corporate sector.
• SEBI is also empowered to establish a comprehensive Investor Grievance Redressal Mechanism and direct market intermediaries and issuers to adopt similar systems. This mechanism could potentially address concerns related to corporate environmental compliance, similar to how environmental clearances are monitored.

Market Integrity, Decriminalisation, and Institutional Coordination

• The Bill proposes decriminalisation of securities law violations, categorising contraventions into two types. This approach to regulatory enforcement bears similarities to recent discussions on ex post facto environmental clearances.
• Fraudulent and unfair trade practices will remain serious violations but may not automatically attract criminal liability. This nuanced approach to enforcement echoes debates in environmental jurisprudence regarding the balance between development and conservation.
• A separate category of “market abuse” covers grave violations affecting market integrity and public interest, attracting civil penalties and, in select cases, criminal treatment. This categorization is reminiscent of how environmental violations are treated under laws like the Forest Conservation Act.
• To improve the investment climate, the Code provides an enabling framework for inter-regulatory coordination, allowing SEBI to frame regulations in consultation with other regulators. This collaborative approach mirrors efforts in environmental governance to coordinate between various agencies for comprehensive environmental impact assessments.
• The Bill allows SEBI to delegate certain registration functions to Market Infrastructure Institutions (MIIs) and Self-Regulatory Organisations (SROs), improving regulatory efficiency. This delegation of authority is similar to how certain environmental clearances are managed at different governmental levels.