In a significant move to overhaul India's financial regulatory landscape, Finance Minister Nirmala Sitharaman introduced the Securities Markets Code Bill of 2025 in Parliament last week. This landmark legislation, now with a parliamentary panel for review, promises to consolidate fragmented laws and bolster the Securities and Exchange Board of India (Sebi). The initiative fulfills a budget promise made by Sitharaman back in February 2021.
Unifying Legacy Laws for a Modern Market
The core objective of the Bill is to merge and replace three outdated acts: the Securities and Contracts (Regulation) Act of 1956, the Sebi Act, and the Depositories Act. This consolidation is designed to eliminate jurisdictional overlaps that have long made market regulation cumbersome. The new code aims to create a unified framework for key market infrastructure institutions like stock exchanges, clearing corporations, and depositories.
Beyond simplification, the Bill seeks to strengthen investor protection and ease compliance burdens. A major step is the proposal to decriminalize numerous minor, technical, or procedural lapses, shifting focus to more serious market offences. Furthermore, the legislation introduces an ombudsman mechanism, promising a structured system for dispute resolution and grievance redressal that India's securities market has historically lacked.
Empowering the Regulator: New Powers and Governance
A central pillar of the proposed code is the enhancement of Sebi's authority and governance structure. The Bill proposes to expand Sebi's board from nine to fifteen members, allowing for up to six independent directors with specialized expertise in finance, law, and economics. This move is intended to infuse diverse knowledge into the regulator's top decision-making body.
The government will also gain explicit authority to remove any board member found to have a conflict of interest or involved in impropriety. These changes are seen as crucial for restoring and bolstering market confidence in Sebi's regulatory capacity, especially after recent episodes involving allegations by a US short-seller and revelations of derivative trading manipulation.
The Critical Gap: Sebi's Human Resource Deficit
Despite these sweeping reforms, analysts point to a significant lacuna in the Bill: it does not address Sebi's pressing need to build a strong, independent cadre. As a relatively young regulator overseeing rapidly evolving and sophisticated markets, Sebi requires a dedicated pool of personnel with deep regulatory skills.
Experts argue that while expanding the board and granting more powers is necessary, the real regulatory capacity lies in its executive backbone. The parliamentary committee scrutinizing the Bill is now urged to consider this human resource challenge seriously. For Sebi to effectively police modern markets, it must develop its own talent pipeline, much like older institutions such as the Reserve Bank of India.
The Securities Markets Code Bill 2025 represents a foundational shift towards a more coherent and robust regulatory regime. Its success, however, will ultimately depend not just on the laws on paper, but on the strength and expertise of the regulator tasked with enforcing them.
