Securities Markets Code, 2025 introduced in Lok Sabha: Key Highlights and Implications

On 15-12-2025, the Securities Markets Code, 2025 was introduced in Lok Sabha to introduce a framework that consolidates and modernises existing securities laws to strengthen investor protection, streamline regulation, and align with evolving technology and market practices.

Key Highlights:

1. The Securities Markets Code Bill aim to:

   • Consolidation and Rationalization: Merge fragmented laws into a single, streamlined framework.

   • Investor Protection: Strengthen mechanisms for safeguarding investor interests.

   • Ease of Doing Business: Reduce compliance burden and decriminalize minor procedural lapses.

   • Technological Adaptation: Incorporate provisions for digital securities, dematerialization, and regulatory sandboxes.

2. Section 2 provides details of definitions and interpretations according to this Code, such as:

   • Bench: A Bench of the Tribunal.

   • Beneficial Owner: A person recorded with a depository as the owner of securities or regulated instruments.

   • Board: Refers to the Securities and Exchange Board of India (‘SEBI’) as per Section 3 of this Code.

   • Government Security: As defined under the Government Securities Act, 2006.

   • Securities: Includes shares, bonds, debentures, derivatives, receipts, instruments, gold receipts, rupee bonds, and other notified instruments, but excludes unit-linked insurance policies.

   • Securities Markets: Markets related to securities transactions and instruments.

   • Stock Exchange: Any ‘Person’ engaged in regulating the business of buying, selling or dealing in securities

3. Securities and Exchange Board of India:

   • Section 3 of this Code states that SEBI originally set up under the SEBI Act, 1992, will now be deemed incorporated under the Securities Market Code.

   • SEBI will continue to have its head office in Mumbai and other offices across the country.

   • The Board will consist of:

     ○ A Chairperson appointed by the Central Government,

     ○ 2 ex officio Members from the Ministry of Finance and administration of the Companies Act,

     ○ 1 ex officio Member from the Reserve Bank of India, and

     ○ 11 other Members as specified in subsequent provisions.

4. The Board is entrusted with the following functions:

   • Investor Protection & Market Development: Safeguard investor interests and regulate overall functioning of securities markets.

   • Registration & Regulation: Register and oversee intermediaries, market infrastructure institutions, and self-regulatory organisations.

   • Securities Oversight: Supervise issuance, listing, delisting, transfer, acquisitions, and takeovers.

   • Public Issues & Fundraising: Regulate or prohibit prospectuses, advertisements, and solicitation of funds or schemes.

   • Fair Practices & Governance: Prevent fraud, curb market abuse, and ensure transparency, disclosure, and good governance.

   • Investor Education & Grievances: Promote awareness and ensure effective grievance redressal mechanisms.

   • Capacity Building: Provide training for intermediaries, market participants, and SEBI officers.

   • Information Gathering: Call for information from market participants, banks, and authorities in India or abroad.

   • Inspections & Research: Conduct inspections, investigations, adjudications, levy fees, and undertake regulatory impact assessments.

   • Database & Civil Court Powers: Maintain public database of regulations/orders, review performance, and exercise civil court powers.

5. Chapter IV deals with Registration of Intermediaries, Investors, and Investment Schemes:

   • Section 28- Registration Requirement: All intermediaries, SROs, sponsors, or pooled investment vehicles will register with SEBI; applications follow set criteria, fees, and conditions.

   • Section 31- Delegation of Powers: SEBI can delegate registration powers to market infrastructure institutions or SROs, ensuring fairness, confidentiality, and reasoned decisions.

   • Section 32- Investment Schemes: Defines pooled schemes where profits are shared without daily control, excluding co-ops, NBFC deposits, insurance, provident funds, chit funds, and notified schemes.

   • Section 33- Pooled Investment Vehicles: Funds like mutual, AIFs, REITs, or InvITs can raise investor money, borrow, issue debt, provide security, and repay lenders via trust assets.

   • Section 34- Intermediaries: Intermediaries facilitate securities transactions; brokers will charge fair brokerage, deliver securities, and pay investors within prescribed timelines.

   • Section 35- Market Service Providers: They will ensure fair disclosure, furnish information to SEBI, and invest collected funds as per regulations within specified periods.

   • Section 36- Self Regulatory Organisations: SEBI approves governing norms for SROs, covering contracts, member relations, internal constitution, and management of affairs.

6. Netting and Settlement Framework:

   Chapter IX ensures settlements in securities are final and irrevocable, unaffected by insolvency, with clearing corporations’ claims on collaterals taking precedence and delivery arrangements mandated.

7. Investor Charter and Protection Measures:

   Under Section 71, the Board can frame an Investor Charter outlining principles to protect investors and enhance their participation in securities markets.

8. Market Integrity:

   • Section 92– Prohibition of Fraudulent or Unfair Practices: It explicitly prohibits manipulative or deceptive devices, fraudulent schemes, and unfair practices in connection with the issue, purchase, or sale of securities.

   • Section 93– Prohibition of Market Abuse: Covers insider trading, misuse of non-public information, price manipulation, and dissemination of false or misleading information.

   • Section 96– Punishment for Market Abuse: States that anyone who commits, attempts, or abets market abuse shall be punishable with imprisonment up to 10 years or fine not less than ₹10 lakh and up to ₹25 crore, or both.

   • Section 94– Punishment for Failure to Comply with Orders: Provides similar penalties for non-compliance with interim or final orders under Chapter III.

   • Sections 97 to 109– Decriminalization of Minor Offences: These deal with civil penalties for procedural lapses and technical defaults, replacing criminal prosecution with monetary penalties.

9. Special Courts:

   Sections 113 to 117 ensure speedy trials through Special Courts with High Court approval, direct cognizance, SEBI filed complaints, qualified prosecutors, and compounding of offences under strict conditions.

10. Governance & Innovation Measures:

    • Investor Protection Fund & Accounts: SEBI to maintain audited accounts, including Investor Protection and Education Fund, with reports submitted to Parliament.

    • Regulatory Sandbox: Section 128 states the framework for testing new products, contracts, or services in securities markets with investor safeguards and regulator consultation.

    • Capacity Building: National Institute of Securities Markets will be recognized under Section 129 of the Code, regulated by SEBI for training and development of intermediaries.

The Securities Markets Code simplifies compliance and introduces civil penalties for minor contraventions. By strengthening investor protection, streamlining governance, and fostering innovation through regulatory sandboxes and capacity-building initiatives, it positions India’s securities markets for enhanced resilience, transparency, and global competitiveness.