Finance Minister Nirmala Sitharaman has introduced the Securities Markets Code (SMC) Bill in the Lok Sabha, marking a significant move to enhance the powers of the Securities and Exchange Board of India (Sebi). The bill aims to decriminalize various minor violations, increase Sebi’s board size from nine to fifteen members, and establish clearer timelines for regulatory investigations. This comprehensive legislation seeks to streamline market regulations and strengthen investor protection, and it has been referred to the parliamentary standing committee on finance for further assessment.
Key Objectives of the SMC Bill
The SMC Bill intends to consolidate three existing laws: the Securities Contracts (Regulation) Act of 1956, the Securities and Exchange Board of India Act of 1992, and the Depositories Act of 1996. The government’s objective is to create a more coherent regulatory framework that aligns with current market practices. A primary goal of the bill is to limit criminal liability to serious offenses, such as significant market abuse and non-compliance with Sebi’s orders. Minor infractions will be decriminalized and addressed through civil actions, which is expected to alleviate the judicial system’s burden and enable more efficient regulatory processes.
Enhancing Regulatory Efficiency
The SMC Bill introduces specific timelines for investigations and interim orders, ensuring that enforcement actions are executed promptly. This initiative is designed to provide clarity and certainty for market participants regarding regulatory measures. By establishing a structured approach to investigations, the bill aims to improve the overall efficiency of the regulatory framework. Furthermore, the proposed legislation mandates public consultations for all binding instruments issued by Sebi, including regulations and by-laws from Market Infrastructure Institutions (MIIs), thereby promoting transparency and stakeholder engagement.
Strengthening Investor Protection
A major focus of the SMC Bill is enhancing investor protection and education. The legislation seeks to mandate adherence to an investor charter, which will define the rights and responsibilities of investors. Additionally, it stresses the importance of effective and timely resolution of investor grievances. To facilitate this, Sebi will encourage training for intermediaries and market participants, while the National Institute of Securities Markets (NISM) will gain statutory recognition under the SMC to support training, certification, and research in the securities sector.
Incorporating Global Best Practices
The SMC Bill aims to align India’s securities regulations with global best practices in regulatory governance, accountability, and transparency. This includes the introduction of regulatory impact assessments to evaluate the potential effects of new regulations on the market. By adopting these practices, the government aspires to create a more robust and adaptive regulatory environment that meets the evolving needs of financial markets. The SMC Bill represents a notable step towards modernizing India’s securities regulations and reinforcing the integrity of the financial system.
Digihunt is not a financial advisor and this is not investment advice.