The Lok Sabha has introduced the Securities Market Code Bill, signaling a major transformation in India’s securities law framework. This proposed legislation aims to increase the Securities and Exchange Board of India (Sebi) board membership from nine to fifteen members, enhance governance standards, and strengthen investor protection. Additionally, the Bill seeks to consolidate three existing laws into a single code to streamline regulatory processes and foster a more transparent environment for investors.
Key Changes to Sebi’s Structure and Governance
The Securities Market Code Bill proposes significant alterations to the governance structure of Sebi. A key highlight is the expansion of the Sebi board, which will grow its membership from nine to up to fifteen members. This enlargement is intended to bolster the board’s capacity to effectively oversee and regulate the securities market. The Bill also introduces stricter governance norms, including new grounds for removing board members. For example, if a member acquires financial interests that could conflict with their official duties, they may be removed from the board. Moreover, board members will be obligated to disclose any direct or indirect interests related to matters discussed during meetings, thereby ensuring transparency and accountability.
Consolidation of Existing Securities Laws
A crucial aspect of the proposed legislation is its goal of consolidating three existing laws: the Securities Contracts (Regulation) Act of 1956, the Sebi Act of 1992, and the Depositories Act of 1996. By replacing these laws with a single code, the Bill aims to establish a more coherent and principle-based legislative framework. This consolidation is expected to lower the compliance burden on market participants while improving regulatory governance. The Bill has been referred to a Standing Committee for further consultation, underscoring a commitment to thorough examination and stakeholder engagement.
Enhancing Regulatory Efficiency and Innovation
To boost regulatory efficiency, the Bill grants Sebi the authority to delegate certain registration-related functions to market infrastructure institutions and self-regulatory organizations. This delegation is designed to streamline processes and nurture innovation within the financial sector. Additionally, the Bill allows for the establishment of a regulatory sandbox to encourage the development of new financial products and services. The Code also highlights investor protection by promoting education and awareness, ensuring timely grievance redressal, and facilitating public consultations to engage investors in the regulatory process.
Coordination Among Financial Regulators
The legislation introduces mechanisms to enhance collaboration between Sebi and other financial regulators. A structured Memorandum of Understanding (MoU) framework will facilitate information sharing and clarify the division of responsibilities among regulators. While some defaults are proposed to be decriminalized, the Bill outlines civil actions, including warnings and penalties tied to the financial impact of violations. This balanced approach seeks to maintain regulatory integrity while fostering a more collaborative environment among financial authorities.
Digihunt is not a financial advisor and this is not investment advice.