Securities Markets Code, 2025: Rationalizing India’s Financial Regulatory Framework
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation, and Infrastructure | SDG 16: Peace, Justice, and Strong Institutions
Ministry of Finance | Securities and Exchange Board of India (SEBI)
The Securities Markets Code, 2025, introduced in the Lok Sabha on December 18, 2025, seeks to consolidate and amend archaic laws to align with modern technological developments and evolving regulatory practices. The Code repeals three major enactments—the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996—replacing them with a single, streamlined legislative framework.
Key Structural Reforms:
Unified Adjudication: Streamlines enforcement by ensuring all quasi-judicial actions are undertaken through a single process following a formal fact-finding exercise.
Separation of Functions: Maintains an arm’s length distance between inspection/investigation and adjudication to ensure regulatory impartiality.
Decriminalization: Converts minor, technical, and procedural contraventions into civil penalties to facilitate the “ease of doing business”.
Investor Protection: Introduces the concept of an Ombudsperson to serve as a comprehensive platform for the prompt redressal of unresolved investor grievances.
Regulatory Sandbox: Empowers SEBI to establish a sandbox for testing innovative financial products and services under controlled conditions.
Inter-Regulatory Coordination: Establishes a framework for the listing and trading of “other regulated instruments” to foster seamless market integration.
What is the objective of the “decriminalization” aspect of the Code? It aims to distinguish between grave market abuse and minor procedural defaults. By replacing criminal trials with quantifiable civil penalties for technical errors, the Code reduces the legal burden on market participants while retaining strict imprisonment and heavy fines for serious offences like insider trading.
Policy Relevance
The Code is a step toward making India self-reliant in capital mobilization by building a principle-based regulatory architecture.
Enhanced Transparency: Mandates a consultative process for all subordinate legislation, requiring SEBI to publish draft regulations and public responses on its website.
Institutional Integrity: Requires Board members to disclose “direct or indirect” interests in matters under consideration, effectively eliminating conflicts of interest in high-level decision-making.
Technological Readiness: By redefining “securities” and “underlying” to include digital and hybrid instruments, the Code future-proofs the legal framework for a technology-driven market.
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