Source: Business Standard
Context
The Parliamentary Standing Committee on Finance, chaired by Bhartruhari Mahtab, has tabled its report on the Securities Markets Code Bill, which consolidates India’s securities laws into a single framework. The Bill was introduced in the Lok Sabha by Finance Minister Nirmala Sitharaman on 18 December 2025 and referred to the Committee for scrutiny.
What the SMC Bill Does
- Consolidates and replaces three statutes: the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, and the Depositories Act, 1996.
- The Bill has 157 clauses; the Committee accepted more than 85 suggestions during clause-by-clause examination.
- Stakeholders consulted included RBI, SEBI, chartered accountants, stock exchanges, investors and banks.
Recommendation 1 – Revised Preamble & Long Title
- Preamble should clearly state the objectives: investor protection, securities market development, and effective regulation, not merely consolidation of existing laws.
Recommendation 2 – Delete Clause 93(g)
- Remove Clause 93(g) as it gives SEBI excessive power to create criminal offences, amounting to excessive legislative delegation.
Recommendation 3 – Criminal Offences in the Code
- All criminal market abuse offences should be explicitly listed in the Code, not left to SEBI’s regulations.
Recommendation 4 – Limit Delegated Legislation
- Prohibit delegation of essential legislative functions and clearly define Parliament’s and SEBI’s respective roles.
Recommendation 5 – Investigation Notices
- Prior notice applies only to the person under investigation, with exceptions where evidence may be destroyed or tampered with.
Recommendation 6 – Ombudsperson
- Retains SEBI officer as ombudsperson; 120-day timeline prescribed for grievance redressal.
Recommendation 7 – Surplus Transfer Retained
- SEBI’s annual surplus will continue to be transferred to the Consolidated Fund of India, while 25% is kept in a reserve fund (subject to the prescribed cap). Critics argue this may blur the distinction between a regulatory fee and a tax.
Key Terms
- Securities Markets Code (SMC): A proposed single consolidated statute merging the SEBI Act, 1992, the SCRA, 1956, and the Depositories Act, 1996. It follows the model of the Labour Codes and the Income Tax Bill in consolidating fragmented law.
