Nirmala Sitharaman Introduces Securities Markets Code Bill, 2025 In LS
The bill proposes new grounds for removal of a member if he has acquired any financial or other interests that are likely to prejudice his function
New Delhi: In a move to provide greater investors’ protection, transparency and market development, Union finance minister Nirmala Sitharaman on Thursday introduced the Securities Markets Code Bill, 2025 in the Lok Sabha, proposing a unified legislative framework to govern India’s securities markets by repealing and merging age-old three existing laws — the Sebi Act, 1992, the Depositories Act, 1996, and the Securities Contracts (Regulation) Act, 1956.
The finance minister also proposed to send the bill to a parliamentary panel for further discussion. The proposed code seeks to consolidate and amend laws relating to the securities markets with the objective of strengthening the regulatory architecture, improving investor protection, and enhancing the efficiency and ease of doing business in capital markets in the country.
The bill proposes new grounds for removal of a member if he has acquired any financial or other interests that are likely to prejudice his function. “It requires a member to disclose any ‘direct or indirect’ interest, including such interest of family members concerning the subject matter of the Board meeting, and refrain from participation where such interests exist,” the bill said.
According to the bill, the code aims to reinforce the powers and governance framework of the capital market regulator Sebi, referred to as the ‘board’, while adopting a principle-based legislative approach. “Sir, I rise to move that bill to be referred to the parliamentary standing committee on finance. The committee shall make a report by the first day of next session, if the speaker so decides,” she said, while introducing the bill.
To strengthen investor grievance redressal, the code also provides for the establishment of an Ombudsperson mechanism. It also empowers the board to set up a regulatory sandbox to facilitate innovation in financial products and services under controlled conditions. The bill, however, mandates greater transparency and accountability in decision-making by requiring members of the board to disclose any direct or indirect interests while participating in regulatory decisions.
While presenting the union budget for the year (2021-22) in Parliament, the union minister for finance and corporate affairs Sitharaman had announced the government’s plan to merge multiple existing laws in a single and rationalised framework. “The proposed law also seeks to ensure a transparent and consultative process for the issuance of subordinate legislation, including regulations and guidelines, reinforcing predictability for market participants,” an official statement said.
“The code also decriminalises certain contraventions of minor, procedural and technical nature into civil penalties to facilitate the ease of doing business and to reduce the compliance burden. The civil penalties are anchored to unlawful gains or losses caused with a view to ensure appropriate and adequate response to the gravity of the contraventions,” the statement said, adding that it also promotes standardisation in quantifying unlawful gains and losses to investors and fosters objectivity in undertaking enforcement actions like penalty imposition.
In major reforms in the capital market, the code bill also seeks to strengthen the regulatory mechanism of the Sebi by expanding the board up to 15 members from existing nine members, including chairperson providing a transparent and consultative process for issuing any subordinate legislation among other things.
