One Code to Rule the Market? SEBI Wades into Reform and Power
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One Code to Rule the Market-The Securities Markets Code, 2025-Between Reform, Reach, and Regulatory Restraint
By P. Sesh Kumar
New Delhi, December 19, 2025 — The Securities Markets Code Bill, 2025 is being presented as a landmark consolidation—one modern statute replacing a clutter of legacy laws to simplify compliance, strengthen investor protection, and sharpen market enforcement. At one level, the promise is real.
By collapsing multiple overlapping statutes into a single framework, rationalising disclosure obligations, separating minor civil lapses from serious market abuse, mandating stakeholder consultation in rule-making, strengthening investor grievance redressal, and formalising conflict-of-interest disclosures for SEBI’s leadership, the Code attempts to make India’s securities regulation clearer, more predictable, and easier to navigate for both companies and investors.
These are tangible improvements that address long-standing pain points in compliance, transparency, and trust.
Yet consolidation is never merely technical; it is also constitutional. Beneath the language of simplification lies a significant re-allocation of power-towards the regulator and, indirectly, the executive-through broad enabling provisions, enhanced enforcement and prosecution architecture, restrictions on ordinary civil remedies, and widened scope for delegated legislation.
India’s own reform history offers a sobering caveat. The Companies Act, 2013, the Insolvency and Bankruptcy Code (IBC), National Financial Reporting Authority (NFRA), and the long-gestating new Income-tax Code all began as ambitious, principle-driven reforms promising certainty and simplicity, only to encounter complexity, frequent amendments, litigation-led evolution, and institutional stress during implementation.
These experiences demonstrate that strong codes mature not through initial elegance but through iterative correction, judicial engagement, and democratic oversight.
Can we therefore argue that the true success of the Securities Markets Code will depend not on the boldness of its first draft, but on whether it embeds safeguards against over-centralisation, strengthens independent appellate and review mechanisms, preserves legislative and procedural checks, and builds humility into its design by anticipating future course corrections.
If Parliament uses the current scrutiny process to balance simplification with restraint, the Code can become a durable foundation for India’s capital markets. If not, it risks repeating a familiar cycle-bold reform followed by patchwork repair.
The Securities Markets Code Bill, 2025 is being projected as a once-in-a-generation clean-up of India’s securities law architecture: one modern code replacing four aging statutes, promising simpler compliance, faster investor protection, and sharper enforcement.
Yet consolidation is never merely technical; it is also constitutional. The Code simultaneously simplifies procedures and concentrates power, reduces paperwork while expanding prosecutorial reach, and strengthens transparency even as it dilutes legislative oversight.
India’s draft Securities Markets Code (SMC or the Code) arrives wearing the clothes of reform, but carrying the weight of power. On the surface, it looks like overdue housekeeping: a single statute replacing a confusing tangle of the SEBI Act, the Securities Contracts (Regulation) Act, the Depositories Act, and allied provisions.
For decades, market participants have lived with this fragmentation, often complying not because rules were clear, but because non-compliance was frightening. The Code promises to end this statutory schizophrenia-and in some important ways, it does.
For a listed company, the most immediate and tangible relief lies in consolidation itself. Earlier, a single corporate action-say a rights issue or an ESOP allotment-required navigating three different Acts, each with its own definitions, compliance hooks, and enforcement logic.
The same disclosure travelled through multiple statutory doors, reviewed by multiple legal teams, often saying the same thing in slightly different language. The Code collapses these parallel tracks into a single statutory spine.
Compliance does not disappear, but duplication does. The compliance officer’s question becomes simpler: “What does the Code require?” rather than “Which Act am I violating?”
This is not a cosmetic gain. It reduces interpretational disputes, legal vetting cycles, repetitive filings, and regulatory anxiety-especially for mid-sized listed companies and intermediaries that do not have armies of lawyers. Simplification here is not deregulation; it is rationalisation.
The Code also makes a conscious attempt to civilise enforcement. Under the earlier regime, minor procedural lapses-late filings, clerical errors, technical breaches-sat uncomfortably close to criminal provisions scattered across multiple statutes.
The fear of prosecution drove compliance behaviour more than clarity of rules. The SMC redraws this boundary. It separates minor civil defaults from serious market abuse, signalling that honest mistakes are to be corrected, not criminalised.
A small broker who misses a reporting deadline due to a systems failure is no longer staring at the spectre of jail. Enforcement becomes proportionate to intent and harm, not merely to technical breach.
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On the investor side, the Code would appear to quietly attempt something even more significant. Investor grievances today often move in circles-between companies, registrars, exchanges, and SEBI’s complaint portal-without clear accountability for resolution.
The SMC strengthens the legal footing of investor charters and grievance redressal mechanisms, moving them from administrative practice to statutory expectation. An unresolved complaint is no longer just “pending”; it is a failure of a legally recognised redressal system.
For retail investors, especially senior citizens and small savers, this shift matters more than any abstract debate on regulatory philosophy. Speed, certainty, and escalation are built into the architecture.
Transparency, too, may no longer be optional etiquette. The Code mandates structured stakeholder consultation before significant regulations are finalised. This alters the character of rule-making itself.
A SEBI regulation, say, on algo trading, disclosure norms, or intermediary obligations must now pass through public scrutiny, absorb feedback, and explain why certain views were rejected. Regulation ceases to be a monologue and becomes a documented conversation. Predictability improves not because rules are softer, but because they are reasoned.
Perhaps, the most understated but institutionally important reform lies in ‘conflict-of-interest’ governance. The Code requires SEBI Board members to declare personal and financial interests before participating in decisions. This is not mere ethics theatre. It protects the regulator as much as the market. A disclosed and recused interest neutralises suspicion, shields honest decision-makers, and strengthens trust in outcomes. Markets are often destabilised not by corruption, but by perceived bias. Sunlight, here, is a stabiliser.
And yet, for all these real gains, the Code carries a deeper unease-because simplification of law has been paired with concentration of power.
The Code strengthens SEBI’s investigative, enforcement, and punitive toolkit dramatically. It introduces a consolidated concept of “market abuse”, links it to severe penalties, and facilitates interaction with criminal enforcement regimes. It restricts ordinary civil court jurisdiction and relies heavily on specialised processes. It allows the Central Government to issue directions to the regulator and even supersede the Board under specified conditions. These are not trivial shifts. They alter the balance between Parliament, the executive, the regulator, and the regulated.
The core criticism is not that SEBI should be weak-it should not. The criticism is that the Code risks turning SEBI into investigator, rule-maker, adjudicator, and prosecution trigger within a single ecosystem (which the higher judiciary had found fault with in the case of NFRA), while Parliament retreats after passing a broad enabling statute. Principles replace precision, and discretion expands faster than safeguards.
The international comparison: what mature systems get right that India must not skip
Global experience offers a cautionary map. Across major markets, regulators are powerful-but their power is typically split, reviewed, and procedurally fenced. Even systems with strong state control define review lanes, however constrained. The common thread is simple: regulatory muscle is tolerated only when matched by credible, accessible review.
In the United States, the SEC is a formidable civil enforcement agency-but criminal prosecution is not “SEC’s power”; it is typically handled through the Department of Justice, with the SEC referring matters and assisting. This division of labour is not a technicality; it is a liberty safeguard.
In the United Kingdom, strong enforcement sits alongside a well-developed tribunal appeal culture. Financial-services regulatory decisions can be challenged through structured tribunal mechanisms (including the Upper Tribunal ecosystem), reinforcing the idea that enforcement power must be matched by accessible, credible review.
Singapore’s MAS framework includes formalised appeal procedures under MAS-administered legislation, using an Appeal Advisory Committee process-again, a reminder that power is acceptable when review is built-in and practical.
Japan offers a different model: investigative and surveillance functions (SESC) are structurally distinct in the ecosystem and feed into administrative processes, showing how institutional design can reduce “same body does everything” concerns.
China’s administrative law architecture strongly leans toward state power, but it still formalises administrative reconsideration and judicial routes under administrative litigation principles-illustrating that even high-control systems define review lanes, though their practical independence is a separate debate.
Brazil’s CVM governance highlights another safeguard: board members nominated by the President but approved by the Senate, with structured terms-an institutional check aimed at credibility and autonomy.
South Africa explicitly creates an independent Financial Services Tribunal to reconsider regulators’ decisions-an appeal architecture meant to keep markets fair while regulators remain strong.
In the UAE (especially DIFC/DFSA), there is a Financial Markets Tribunal framework with legal appeal pathways, reflecting a model where enforcement is paired with specialist adjudication and appellate structure. ,
Even the “onshore” UAE securities law architecture provides appeal pathways in specified penalty contexts (e.g., appeal to the Authority within a defined period, with finality clauses)-again showing the centrality of defined review routes.
The lesson is not that we should copy any one model. The lesson could be that regulatory power is accepted globally only when matched by independent review, procedural fairness, clear separation where feasible, and transparency about discretion.
Can we then say that the draft Code, as drafted, gets the ‘what’ of reform right but leaves the ‘how’ of accountability dangerously thin.
This is where the referral to the Parliamentary Standing Committee becomes decisive. It offers the chance to convert consolidation into constitutional consolidation. The Committee can insist that separation of functions is not merely promised but designed; that appellate mechanisms are not theoretical but effective; that Government direction powers are narrowly framed, transparently reported, and legislatively reviewable; and that immunity and discretion are fenced by reason-giving and oversight.
Yet, before the Securities Markets Code is crowned as the long-awaited silver bullet, we would do well to pause-and remember our own recent very challenging reform history. Because ambition, in Indian economic law, has a habit of colliding with implementation reality.
The Companies Act, 2013 arrived with similar fanfare. It was hailed as a modern, principles-based overhaul that would replace a colonial-era statute, strengthen corporate governance, empower minority shareholders, and professionalise boards. In spirit, it did all that. In practice, it became one of the most amended economic laws in India’s history within a decade of its birth. Section after section had to be tweaked, exemptions carved out, thresholds revised, penalties softened, and procedures rationalised-often in response to the sheer compliance burden it unintentionally imposed, especially on smaller companies. What began as a clean break from the past slowly turned into a dense web of rules, notifications, carve-outs, and clarifications, understood fully only by specialists. Defenders would like to say that amendments are proof of a ‘responsive’ Government and not of weakness in law.
The Insolvency and Bankruptcy Code (IBC) followed a similar arc, albeit with even higher stakes. When introduced in 2016, it was celebrated-rightly-as a transformative shift from debtor-friendly to creditor-driven resolution. Time-bound insolvency, commercial decision-making, and a clean exit framework were its hallmarks.
But the IBC’s journey has been anything but linear. It has already undergone dozens of amendments, regulatory overhauls, judicial reinterpretations, and course corrections-sometimes reacting to market abuse, sometimes to judicial pushback, and sometimes to sheer operational impracticality. Ironically, a Code designed for certainty became one of the most litigated economic statutes in the country, with its contours shaped as much by Supreme Court judgments as by Parliament. The lesson is not that the IBC failed-it can be considered to have succeeded-but that complex markets inevitably stretch even the best-designed codes.
National Financial Reporting Authority (NFRA) offers a different cautionary tale. Conceived after high-profile audit failures as a muscular, independent audit regulator, it was meant to redraw the balance of power between the profession and the public interest. Yet 9 years after its notification, NFRA is still grappling with jurisdictional uncertainty, constitutional challenges, overlapping authority with ICAI, and questions about due process. Its enforcement ambition ran ahead of its institutional bedding-in. Authority came quickly; legitimacy took longer.
And looming on the horizon is the new Income-tax Code, scheduled for rollout from 1 April 2026—promising simplicity, certainty, and fewer disputes. It echoes precisely the language once used for the Direct Tax Code drafts, and even earlier for GST. Experience suggests caution. Tax law, like securities law, lives not on paper but in assessment orders, appellate corridors, and enforcement practice. Simplification at the statute level often gives way to complexity in rules, circulars, FAQs, and litigation once real-life transactions collide with legislative abstractions.
The common thread across all these reforms is not failure, but friction. India’s economic codes tend to be born clean, ambitious, and principle-driven-but they mature through amendment, exception, judicial interpretation, and regulatory recalibration. Power granted early often needs restraint later. Discretion conferred generously often needs fencing once real-world consequences surface.
The Securities Markets Code is unlikely to be different.
That is not an argument against the Code. It is an argument against premature triumphalism. The real test of the SMC will not be how elegant it looks in its first avatar, but how honestly it responds to market feedback, judicial signals, and institutional stress once enforcement begins. If Parliament learns from the Companies Act’s amendment fatigue, from the IBC’s litigation-heavy adolescence, from NFRA’s unsettled authority, and from the long gestation of tax reform, it can embed humility into the Code itself-by designing strong feedback loops, sunset reviews, and correction mechanisms upfront.
Otherwise, we may risk repeating a familiar cycle: bold reform followed by patchwork repair masquerading as ‘Government’s openness to adjusting to the ever-evolving dynamics of governance’
A Securities Markets Code that acknowledges this history-and plans for it-will not be weaker. It will be wiser.
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Retain Simplifications
Do we really need to choose between strong regulation and fair regulation. We can have both. The Securities Markets Code should retain its genuine simplifications-single-statute clarity, proportionate compliance, faster investor redressal, mandatory consultation, and conflict-of-interest disclosure. But these must be matched with explicit safeguards: strengthened and independent appellate structures, clearer limits on delegated legislation, transparent use of Government direction powers, and institutional separation between investigation and adjudication.
If these corrections are made, the Code can become what it promises to be-a modern, credible foundation for India’s capital markets. If they are not, the simplification of law may come at the cost of constitutional balance, and the market may discover that clarity without restraint is merely another form of uncertainty.
(This is an opinion piece, and views expressed are those of the author only)
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