The Union government on Thursday introduced in Parliament the 2025 Securities Markets Code Bill to replace three laws related to the regulation of securities markets.
The proposed law will replace the 1992 Securities and Exchange Board of India Act, the 1956 Securities Contracts Regulation Act and the 1996 Depositories Act.
Speaking in the Lok Sabha, Union Finance Minister Nirmala Sitharaman proposed referring the bill to the standing committee for scrutiny.
The proposal came after Congress MP Manish Tiwari and Dravida Munnetra Kazhagam’s Arun Nehru opposed the bill at the introduction stage, describing it as a “case of excessive delegation of power”.
Sitharaman said that the objections could be discussed later as the government was referring the bill to the standing committee.
Krishna Prasad Tenneti, chairing the proceedings, said that the Lok Sabha speaker will decide on the matter.
According to the Union government, the new legislation “rationalises and consolidates the existing provisions and provides a modern regulatory framework for investor protection and capital mobilisation at a scale commensurate with the emerging needs of the fast-growing Indian economy”.
It would also require members of the Securities and Exchange Board of India to disclose all “direct and indirect” interests while participating in decision-making processes of the markets regulator.
This came against the backdrop of allegations raised in August 2024 against Madhabi Puri Buch, the SEBI chairperson at the time, that she and her husband, Dhaval Buch, had “hidden stakes” in offshore entities tied to stock price manipulation and money laundering by the Adani Group. Madhabi Buch and Dhaval Buch denied the allegations.
The proposed law will also prohibit the chairperson and members of the board from accepting any employment under the Centre or state governments for one year after leaving office, except with the prior approval from the Union government.
It will also prohibits them from accepting an appointment with a securities markets service provider or a market participant, or any person associated with securities markets, for a year.
The law would also prohibit an investigation or inspection “for default or contravention” of any provisions of the code, or its rules and regulations, after eight years have passed from the date of the default or contravention.
However, the board may order a probe even if the eight-year period has elapsed in cases where a matter is referred to it by an investigating agency, or if the panel is of the view that the default or contravention may have a “systemic impact” on the securities markets.
The proposed legislation has a provision to prohibit board members from directly or indirectly committing acts of market abuse, such as insider trading and using devices, schemes or artifices to defraud investors in the securities markets.
It also has provisions to bar persons from dealing in securities while in possession of material or non-public information, or communicating such material or non-public information to others in a manner that contravenes the provisions of the code.
It bars persons from publishing false or misleading information relating to securities with the intent of artificially inflating, depressing or causing fluctuation in their prices.
The proposed legislation prescribes a maximum sentence of 10 years for market abuse.
The bill proposed to bring the offence of “market abuse” under the Schedule of the Prevention of Money Laundering Act. This means that the Enforcement Directorate can initiate investigations under the anti-money laundering law against persons who are accused in such cases.
Bill risks diluting SEBI’s autonomy, says Opposition
Congress has raised concerns over the proposed bill.
“The proposed bill risks diluting SEBI’s regulatory autonomy, weakening its ability to protect investors against fraud and market manipulation through fragmented oversight,” said Syed Naseer Hussain, Rajya Sabha MP from the party.
He added: “It also reduces compliance burdens which may favour large corporates and institutional investors, disadvantaging small and retail participants who lack resources to navigate the new framework.”
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