Securities Markets Code (SMC), 2025
Finance Minister Nirmala Sitharaman introduced the Securities Markets Code (SMC), 2025 in Parliament. This new Bill aims to replace three existing laws and provide the markets regulator with enhanced powers.
Main Provisions of the Bill
- Removal of Board Members:
- The Bill empowers the removal of a SEBI Board member for acquiring any financial or other interest that could prejudice their official duties.
- Board members must disclose any direct or indirect interests, including those of family members, and recuse themselves if necessary.
- Expansion of SEBI Board:
- The SEBI Board's size will increase from nine to fifteen members.
- The Board composition includes a chairperson, two Central government members, one Reserve Bank of India officer, and eleven other members, with at least five being whole-time members.
- Consolidation of Laws:
- The SMC will consolidate the Securities Contracts (Regulation) Act, 1956, SEBI Act, 1992, and Depositories Act, 1996.
- Decriminalization of Securities Laws:
- Contraventions will be classified into two categories:
- Fraudulent and unfair trade practices, not attracting criminal liability.
- “Market abuse” for graver violations, potentially attracting civil penalties and being treated as offences.
- Contraventions will be classified into two categories:
- Delegation of Registration Functions:
- SEBI can delegate parts of its registration functions to Market Infrastructure Institutions (MIIs) and Self-Regulatory Organisations (SROs).
- Investor Protection:
- Mandates SEBI to specify an investor charter and establish an Investor Grievance Redressal Mechanism.
- Directs securities market service providers to set up similar mechanisms.
- Inter-regulatory Coordination:
- Provides a framework for improved coordination among regulators, including interoperability across platforms.
Implications and Comments
- Arka Mookerjee of JSA Advocates & Solicitors highlighted the Bill's role in consolidating key regulations, though future impacts of SEBI rules and guidelines remain to be seen.
