The Securities Markets Code, 2025, introduced in the Lok Sabha, proposes a comprehensive overhaul of India’s securities law framework by repealing and consolidating three legacy statutes governing securities regulation, market oversight, and depositories. The Bill seeks to modernise regulation in line with evolving market practices, technological advancements, and the growing scale of capital markets. It strengthens the powers and accountability of the securities regulator, introduces transparent rule-making and periodic regulatory review, and streamlines inspection, investigation, and adjudication through a unified, time-bound enforcement mechanism. A key reform is the decriminalisation of minor and procedural defaults, replacing criminal sanctions with proportionate civil penalties linked to unlawful gains or investor losses, while retaining strict punishment for market abuse. The Bill enhances investor protection through mandatory grievance redressal mechanisms and an Ombudsperson framework, facilitates innovation via a regulatory sandbox, and enables coordinated regulation of other financial instruments. Overall, the Code aims to reduce compliance burden, improve governance, and promote investor confidence and capital mobilisation.
AS INTRODUCED IN LOK SABHA
Bill No. 200 of 2025
THE SECURITIES MARKETS CODE, 2025
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ARRANGEMENT OF CLAUSES
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STATEMENT OF OBJECTS AND REASONS
The sound regulation of securities markets is imperative as such markets are instrumental for effective mobilization of capital for productive investments, wealth creation and protection of investors’ confidence.
2. The extant laws relating to the securities markets are primarily (i) the Securities Contracts (Regulation) Act, 1956 (42 of 1956) enacted to prevent undesirable transactions in securities by regulating the business of dealings therein; (ii) the Securities and Exchange Board of India Act, 1992 (15 of 1992) providing for the establishment of the Securities and Exchange Board of India (the “Board”) as the primary regulator for the securities markets to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market; and (iii) the Depositories Act, 1996 (22 of 1996) that provides for regulation of depositories in securities. As these laws were enacted decades ago, a review was required to reform the extant legislative framework to align with the evolving regulatory practices, latest developments in technology and the changing character of securities markets.
3. The Securities Markets Code, 2025 seeks to repeal the aforesaid three Acts, rationalises and consolidates the existing provisions and provides a modern regulatory framework for investor protection and capital mobilisation at a scale commensurate with the emerging needs of the fast-growing Indian economy. The Code endeavours to build a principle based legislative framework to reduce compliance burden, improve regulatory governance and enhance dynamism of the technology driven securities markets. The language of the Code has been simplified to remove obsolete and redundant concepts, to duplication of provisions and incorporate consistent regulatory procedures for standard processes, and to ensure a uniform and streamlined framework of Securities Laws. The Code is expected to further develop the financial sector in general and securities markets in particular and make India self-reliant in terms of mobilising capital for productive investment.
4. The Code seeks to strengthen the regulatory mechanism of the “Board” by providing a transparent and consultative process for issuing any subordinate legislation. It also requires periodic review of such regulations for their proportionate and effective implementation and regulatory impact assessment studies. The Code seeks to eliminate conflict of interest by requiring the Members of the “Board” to disclose any “direct or indirect” interest while participating in decision-making. It enables the “Board” to maintain a reserve fund and transfer the surplus, if any, to the Consolidated Fund of India. It streamlines the adjudication procedure and ensures that all quasi-judicial actions are undertaken through a single adjudication process after an appropriate fact-finding exercise. The Code maintains an arm’s length separation between inspection or investigation and adjudication proceedings and defines timelines for investigations and interim orders for a time-bound completion of the enforcement process.
5. As a significant progressive step, the Code decriminalises certain contraventions of minor, procedural and technical nature into civil penalties to facilitate the ease of doing business and to reduce the compliance burden. The civil penalties are anchored to unlawful gains or losses caused with a view to ensure appropriate and adequate response to the gravity of the contraventions. It promotes standardisation in quantifying unlawful gains and losses to investors and fosters objectivity in undertaking enforcement actions like penalty imposition. However, punishment for market abuse is provided to deter persons from committing contraventions that adversely affect the market integrity. Further, the Code provides restriction period for initiating inspection or investigation to avoid delayed enforcement measures.
6. The Code further seeks to strengthen investor protection, promote investor education and awareness, and ensure effective and time-bound redressal of investor grievances. It enables effective and prompt resolution of investor grievances by introducing the concept of an Ombudsperson as a comprehensive platform for redressal of any unresolved grievances. The Code also enables the Board to establish a Regulatory Sandbox to facilitate innovation in financial products, contracts and services. Furthermore, an enabling framework is established for the inter-regulatory coordination of other regulated instruments to facilitate a seamless process for listing of such instruments.
7. The Code also proposes to amend the Economic Offences (Inapplicability of Limitation) Act, 1974 (12 of 1974), the Prevention of Money-laundering Act, 2002 (15 of 2003), the Fugitive Economic Offenders Act, 2018 (17 of 2018) and the Mediation Act, 2023 (32 of 2023) in the manner provided in the Schedules annexed to the Code.
8. The Notes on Clauses explain in detail the various provisions contained in the Bill.
9. The Bill seeks to achieve the above objectives.
NIRMALA SITHARAMAN.
NEW DELHI;
The 15th December, 2025.
Notes on clauses
Clause 1 of the Bill provides for the short title extent and commencement of the Code.
Clause 2 of the Bill provides for definition of various terms and expressions used in the proposed legislation.
Clause 3 of the Bill provides for the Securities and Exchange Board of India established and incorporated under section 3 of the Securities and Exchange Board of India Act, 1992, shall be the Board for the purposes of this Code.
Clause 4 of the Bill provides for the composition of the Board.
Clause 5 of the Bill provides for the terms and conditions of service of the Chairperson and Members of the Board.
Clause 6 of the Bill provides for the circumstances for removal of Chairperson and Member of the Board.
Clause 7 of the Bill provides for the management of the Board by its Board of Members and the Chairperson.
Clause 8 of the Bill provides for conduct of the meetings of the Board, including the requirement to disclose any direct and indirect interest including the interest of a family member as specified in the regulation.
Clause 9 of the Bill provides for appointment of officers and employees by the Board.
Clause 10 of the Bill provides that the vacancy or defect in the constitution of the Board or appointment of Members or irregularity in procedure shall not invalidate an act or proceedings of the Board.
Clause 11 of the Bill provides that the Board shall protect the interest of investors in securities and promote the development of, and regulate the securities markets, by such measures as it may deem fit, subject to the provisions of this Code. It also provides for specific powers and functions to be exercised or performed by the Board.
Clause 12 of the Bill provides for the powers and functions of the Board to inspect a securities markets service provider, a market participant or any other person associated with securities markets in such manner as may be specified by regulations.
Clause 13 of the Bill provides for the powers and functions of the Board relating to investigations.
Clause 14 of the Bill provides for general powers and obligations of the Investigating Officer and also imposes obligations on a person under investigation.
Clause 15 of the Bill provides for powers related to search and seizure in relation to the investigation conducted by the Investigating Officer.
Clause 16 of the Bill restricts the initiation of inspection and investigation after eight years, except in specific circumstances. It also specifies how to calculate the eight year period for different types of defaults or contravention in other circumstances.
Clause 17 of the Bill provides for the designation of the adjudication officer, once the inspection or investigation is completed, and where the Board is of the opinion that adjudication is required. It further provides for disqualification of certain persons from being appointed as an adjudicating officer to ensure the separation of functions.
Clause 18 of the Bill provides for that once the adjudicating officer is designated, the adjudicating officer shall issue a show cause notice containing the relevant details for the notice and the noticee shall reply in writing along with evidence in support; or else the adjudicating officer may proceed to adjudicate the matter ex parte. Further, the adjudicating officer is vested with the powers of a civil court.
Clause 19 of the Bill provides a list of factors that shall guide the adjudicating officer in determining the appropriate action to be taken in a matter, including its severity.
Clause 20 of the Bill provides for the final order to be passed in adjudication of a show cause notice. The adjudicating officer may either dismiss the show cause notice or pass a common order comprising one or more of the actions listed in this provision.
Clause 21 of the Bill empowers the Board to revise the final order passed by the adjudicating officer, to increase the quantum of penalty and the severity of the direction, where the adjudicating officer has decided to take those actions.
Clause 22 of the Bill empowers the adjudicating officer or the Board to rectify an order for typographical or other inadvertent errors, without modifying the substantive part of the order.
Clause 23 of the Bill provides for the power of the adjudicating officer to issue directions or warnings as part of the final order, where the grounds mentioned in sub-section (1) are satisfied.
Clause 24 of the Bill empowers the adjudicating officer to issue cease and desist orders, pending adjudication or on completion thereof final order.
Clause 25 of the Bill provides for the power of the adjudicating officer to disgorge an amount equivalent to the unlawful gains made by the default or contravention. It also enables the Board to provide restitution to persons affected by the default or contravention if certain conditions are fulfilled, in accordance with the procedure specified by the Board.
Clause 26 of the Bill provides for the settlement of administrative and civil proceedings. It also enables SEBI to consider a settlement application by persons seeking to voluntarily disclose true and vital information which may amount to a contravention.
Clause 27 of the Bill provides the power to pass interim orders after the initiation of the inspection and investigation and before the completion of adjudication. It further provides that the person concerned shall be given an opportunity of being heard before an interim order is issued against him; provided, this requirement may be dispensed with in case of urgency if the conditions for issuing an interim order are met. It also provides that the interim order shall remain valid for a period not more than one hundred eighty days which can be extended as per sub-section (4). It also provides for extension of the interim order up to two years.
Clause 28 of the Bill provides for mandatory registration requirements for intermediaries, self-regulatory organisations and sponsors of pooled investment vehicles and investment schemes in the securities markets.
Clause 29 of the Bill provides for the procedures for surrender, suspension and cancellation of registration of intermediaries and other persons holding a certificate of registration under clause 28 and the powers of the adjudicating officer to cancel the registration or suspend it for the period specified by the regulations.
Clause 30 of the Bill provides for the Board to specify by regulations a class or classes of investors to be registered with it.
Clause 31 of the Bill provides for the delegation of powers of registration by the Board in respect of any class or classes of intermediaries or investors to a market infrastructure institution or a self-regulatory organisation.
Clause 32 of the Bill provides for the provisions in relation to investment schemes with different characteristics and the schemes which shall not be treated as investment schemes.
Clause 33 of the Bill provides for the pooled investment vehicles to mean a fund that is established for investment scheme in the form of trust etc., and various provisions for the same.
Clause 34 of the Bill provides for the provisions in relation to intermediaries which shall provide services related to the issue, sale, purchase or any dealings in securities.
Clause 35 of the Bill provides for the obligation of securities markets service providers to make fair disclosure of such information and at such frequency as may be specified by regulations.
Clause 36 of the Bill provides for the Board to approve the governing norms of a self-regulatory organisation.
Clause 37 of the Bill provide for the mandatory registration requirements for market infrastructure institutions to carry out business in the securities markets.
Clause 38 of the Bill provides for cancellation of registration or suspension of business of market infrastructure institutions in the interest of trade or public interest. It further provides that no cancellation of registration or suspension of business shall be made without giving an opportunity of being heard to the applicant.
Clause 39 of the Bill empowers market infrastructure institutions to make bye-laws and specifies the details therein to be included in the bye-laws.
Clause 40 of the Bill provides the power of the Board to direct bye-laws to be made or to make such bye-laws.
Clause 41 of the Bill provides that where a member contravenes a bye-law of a market infrastructure institution, the market infrastructure institution may, by an order, take measures against such members.
Clause 42 of the Bill provides certain ownership norms for, and the manner of management of, market infrastructure institutions.
Clause 43 of the Bill provides that a market infrastructure institution shall furnish a copy of its annual report and such other information in such manner as may be specified by regulation, to the Board.
Clause 44 of the Bill empowers the Central Government, on the recommendation of the Board, to supersede the governing board of a market infrastructure institution or a self-regulatory organisation.
Clause 45 of the Bill provides the circumstances in which the contracts for or relating to the purchase or sale or any dealings in securities shall be illegal.
Clause 46 of the Bill provides that contracts shall be legal and valid if they are made in accordance with the provisions of the Code and any rules or regulations or bye-laws made thereunder and are traded on a stock exchange or settled by a clearing corporation in accordance with the regulations made by the Board in this behalf.
Clause 47 of the Bill provides that any contract which is in contravention of any bye-laws of a stock exchange specified on that behalf, shall be void.
Clause 48 of the Bill lists certain types of contracts which shall not be deemed to be illegal or require prior permission of the Board.
Clause 49 of the Bill empowers the Central Government to notify for commodity in respect of which a derivatives may be entered into or made by any person.
Clause 50 of the Bill empowers the Central Government in the public interest or trade to regulate and control non-transferable specific delivery contracts in commodity or securities, etc., to declare by notification for the applicability of provision of this Code for such class or classes of non-transferable specific delivery contracts and spot delivery contracts for the sale or purchase of such securities.
Clause 51 of the Bill provides for the prohibition of organising or to become member of any association or entity without any registration regarding performance of contracts in securities.
Clause 52 of the Bill prohibits persons to deal in securities through market infrastructure institutions without being a member or a principal.
Clause 53 of the Bill provides the provisions in relation to title to dividends and income from securities.
Clause 54 of the Bill provides for the powers of the Board in respect of depository services.
Clause 55 of the Bill provides for that securities and other regulated instruments in depositories shall be in a dematerialised and fungible form.
Clause 56 of the Bill provides for the process of dematerialisation in respect of securities and other regulated instruments held by depositories by surrendering the certificate of securities and other regulated instruments.
Clause 57 of the Bill provides for the requirements relating to the maintenance of the register and index of beneficial owners by a depository.
Clause 58 of the Bill provides for the manner of registration of the transfer of a security or other regulated instrument in the name of the transferee which shall be the conclusive proof of title of the transferee over such security or other regulated instruments.
Clause 59 of the Bill provides for the manner of creation of a pledge or hypothecation in respect of securities and other regulated instruments through a depository by the beneficial owner by the previous approval of the depository.
Clause 60 of the Bill provides for every depository to furnish information and records and cast duty on issuer to deposit the copy of all relevant records.
Clause 61 of the Bill provides for the rights of registered owners and the beneficial owner in respect of securities or other regulated instruments held by a depository.
Clause 62 of the Bill provides for the obligations of a depository in respect of the securities or other regulated instruments held by it. It further provides the eligibility criteria for admission of securities and the manner of holding the same and to maintain records of beneficial owner.
Clause 63 of the Bill provides the application of the Bankers’ Books Evidence Act, 1891 in relation to a depository as if it were a bank as defined in section 2 of that Act.
Clause 64 of the Bill provides that no securities shall be offered to the public or listed on a Stock Exchange without fulfilling the eligibility criteria.
Clause 65 of the Bill empowers the Board to specify by regulations, the listing and disclosure requirements for issuers. It further provides that the Central Government may by notification in the public interest, exempt any listed public sector company from the requirements.
Clause 66 of the Bill enables the issuer to apply to the Stock Exchange to delist its securities. It further provides that the stock exchange may also on its own delist the securities of an issuer subject to giving an opportunity of hearing to the issuer.
Clause 67 of the Bill provides that the stock exchange may refuse to list or delist the securities of an issuer with reasons.
Clause 68 of the Bill provides for the manner of netting and settlement of transactions undertaken on a stock exchange or clearing corporation.
Clause 69 of the Bill provides for the Market Infrastructure Institution to implement delivery arrangements in respect of contracts of securities as per the regulations.
Clause 70 of the Bill provides precedence over other attachments to dues to be recovered by a clearing corporation in furtherance of its clearing and settlement functions.
Clause 71 of the Bill empowers the Board to specify by regulations, an investor charter providing principles for the protection of investors and facilitation of their participation in the securities markets and such other matters concerning the investors.
Clause 72 of the Bill provides for the Board to specify by regulation an investor grievance redressal mechanism and also direct a securities markets service provider and an issuer to provide investor grievance redressal mechanisms.
Clause 73 of the Bill empowers the Board to designate one or more of its officer as an Ombudsperson to receive and redress the grievances of investors.
Clause 74 of the Bill provides that the investor shall first resolve his grievance through the investor grievance redressal mechanisms referred to in section 72 within a period of one hundred and eighty days from the date of first filing of such grievance in any of these mechanisms. It further provides that if the grievance is not resolved within this period, the investor may choose to continue the resolution through these mechanisms or, within thirty days after the completion of this period, file a complaint with the Ombudsperson. It also provides an explanation to explain the meaning of deficiency in service. It also provides that a complaint cannot be filed before the Ombudsperson if a person has initiated a proceeding under any other law in respect of a matter that is directly or substantially in issue in such a complaint.
Clause 75 of the Bill provides that the Ombudsperson may pass an order to direct the respondent to comply with its obligation; return the fee; pay damages; etc., to the complainant after giving him an opportunity of being heard and such order shall be binding to both the parties.
Clause 76 of the Bill provides that while redressing a complaint, if the Ombudsperson is of the opinion that the respondent has contravened any provisions of the Code or the rules or regulations made thereunder, he may inform the Board of such contravention.
Clause 77 of the Bill provides that the Ombudsperson shall have certain powers of a civil court.
Clause 78 of the Bill provides that any order of an Ombudsperson shall not prevent the Board from taking any other action under the Code.
Clause 79 of the Bill provides that the Securities Appellate Tribunal established under section 15K of the Securities and Exchange Board of India Act, 1992 shall be the Securities Appellate Tribunal, for the purposes of the Code.
Clause 80 of the Bill provides for the composition of the Tribunal and its Benches.
Clause 81 of the Bill provides for the appointment, qualifications, terms and conditions of service of the Presiding Officer and other Members of the Tribunal as per the applicable law. It further provides that on the date of commencement of the Code, the Presiding Officer and the Member of the Tribunal shall continue in their office till the remaining period of the tenure unless removed under the provisions of the applicable law.
Clause 82 of the Bill provides for the filling up of the vacancies in the office of the Presiding Officer or any other Member of the Tribunal.
Clause 83 of the Bill provides for the senior-most Judicial Member to act as Presiding Officer in case of vacancy in his office.
Clause 84 of the Bill provides for the officers and employees of the Tribunal. It further provides the officers and employees shall discharge their function under the General Superintendence of the Presiding Officer. It also provides that the Central Government may by rules provides for their salaries, allowance and other condition of service.
Clause 85 of the Bill provides for the appeal to the Tribunal. It provides for the orders or decisions against which an appeal can be made to the Tribunal. It further provides that the appeal may be filed within a period of fourty-five days from the date of order made to the Board. It also provides a proviso empowering the Tribunal to entertain an appeal beyond the said period with sufficient reasons.
Clause 86 of the Bill provides the powers of the Tribunal that of a civil court and shall follow the principle of natural justice. It further provides that proceeding before the Tribunal shall be deemed to a judicial proceeding within the meaning of Bharatiya Nyaya Sanhita, 2023. It also provides for various provisions of Presiding Officer.
Clause 87 of the Bill provides for that the order constituting the Tribunal shall be final and vacancies or defects in the constitution of the Tribunal, will not invalidate proceedings of the Tribunal.
Clause 88 of the Bill provides for the right to legal representation of a party before the Tribunal, either by itself or through persons authorised by such party.
Clause 89 of the Bill provides for the applicability of the provisions of the Limitation Act, 1963, as far as they apply to an appeal made to the Tribunal.
Clause 90 of the Bill provides that the Presiding Officer, Members and other officers and employees of the Tribunal be deemed as “public servants” within the meaning of clause (28) of section 2 of the Bharatiya Nyaya Sanhita, 2023.
Clause 91 of the Bill provides for the appeal to the Supreme Court within a period of sixty days from the date of communication of the decision or orders of the Tribunal by any aggrieved person. It further provides that the Supreme Court may entertain an appeal after the period of sixty days with sufficient cause.
Clause 92 of the Bill lists certain prohibited practices and dealings in securities which pertain to fraudulent or unfair practices such as use of any manipulative or deceptive device in connection with issue, purchase, sale or any dealing in securities; defraud in connection with issue or dealing in securities; make any false or fraudulent entry in any record; etc.
Clause 93 of the Bill lists certain grave acts which adversely affect the integrity of the market which are categorised as market abuse such as engage in insider trading, deal in securities while in possession of material or non-public information, place any order in securities while directly or indirectly in possession of information which is not publicly available, etc.
Clause 94 of the Bill provides for imprisonment for a term which shall not be less than one month but may extend to ten years or with fine of not less than ten lakh rupees but may extend to twenty-five crore rupees or both, if a person fails to comply with the interim order or the final order made under Chapter III.
Clause 95 of the Bill provides for the punishment for failure to comply with the directions of the Investigating Officer.
Clause 96 of the Bill provides for the imprisonment for a term which shall not be less than one month but may extend to ten years or with fine of not less than ten lakh rupees but may extend to twenty-five crore rupees or both, if any person contravenes, attempts to contravene, or abets the commission of market abuse.
Clause 97 of the Bill provides for the penalty for failure in obtaining certificates of registration, failure to furnish correct information or documents, etc. It further provides a monetary range for defaults or contraventions mentioned under sections 97 to 102 and section 109, within which the adjudicating officer shall impose an appropriate penalty while passing the final order for respective default or contravention. It also provides that the minimum penalty amount that should be imposed is fixed, the maximum penalty amount that can be imposed is linked to unlawful gains made by the defaulter or contravener, or loss caused to an investor or other persons and such quantification will depend on the facts and circumstances of each matter, and the criteria and manner for quantifying unlawful gains and losses will be specified in the regulations to ensure uniformity and certainty. It also provides that in cases where the unlawful gains or losses caused are not quantifiable, the maximum penalty amount is specifically provided.
Clause 98 of the Bill provides for the penalty for failure to invest the money collected by a securities markets service provider. It further provides that person who fails to comply with any provisions of this code, rules or regulations made thereunder or directions issued by the board or the bye-laws of a market infrastructure institution.
Clause 99 of the Bill provides for the penalty for contravention by stock brokers.
Clause 100 of the Bill provides for the penalty for failure to redress the grievances of investors.
Clause 101 of the Bill provides for the penalty for failure to dematerialise certificates of securities.
Clause 102 of the Bill provides for the penalty for failure to reconcile the records of dematerialised securities with all the securities issued by the issuer as per the regulations.
Clause 103 of the Bill provides for the penalty for other non-compliances. It provides a higher monetary range for defaults or contraventions mentioned under sections 103 to 108, within which the adjudicating officer shall impose an appropriate penalty while passing the final order for the respective default or contravention. It further provides that while the minimum penalty amount that should be imposed is fixed, the maximum penalty amount that can be imposed is linked to unlawful gains made by the defaulter or contravener, or loss caused to an investor or other persons. It also provides that such the quantification will depend on the facts and circumstances of each matter, and the criteria and manner for quantifying unlawful gains and losses will be specified in the regulations to ensure uniformity and certainty. It also provides that in case of these severe defaults or contraventions; there may be circumstances where the quantifiable unlawful gains or losses are relatively small. and the adjudicating officer may impose a higher penalty. It also provides that in cases where the unlawful gains or losses caused are not quantifiable, the maximum penalty amount is specifically provided.
Clause 104 of the Bill provides a penalty for failure of a market infrastructure institution to conduct its business in accordance with the provisions of this Code.
Clause 105 of the Bill provides a penalty for failure to furnish periodical returns, etc., by any market infrastructure institution or any self-regulatory organisation.
Clause 106 of the Bill provides a penalty for failure to comply with orders of an Ombudsperson.
Clause 107 of the Bill provides a penalty for default by persons managing a pooled investment vehicle.
Clause 108 of the Bill provides for a penalty for dematerialisation of securities in excess of the issued securities of a company or delivery of unlisted securities.
Clause 109 of the Bill is a residuary penalty provision for contraventions where no separate penalty is provided under the Code.
Clause 110 of the Bill provides for the liability of certain persons where a company commits a contravention, whether or not it results in a penalty or punishment. It further clarifies the extent of liability for independent and non-executive directors of a company in such circumstances and aligns it with the Companies Act, 2013.
Clause 111 of the Bill specifies the additional factors for imposition of penalty under sections 97 to 109. In addition to the factors mentioned in clause 19, the adjudicating officer shall also take into account—(a) the amount required to be disgorged and (b) any aggravating and mitigating circumstances. Disgorgement restores the noticee to its pre-contravention position, while penalties are imposed to ensure effective deterrence. When both actions are being undertaken, the adjudicating officer will harmonise the total monetary liability to serve these distinct objectives.
Clause 112 of the Bill provides for crediting all sums realised by way of penalties by the Board to the Consolidated Fund of India.
Clause 113 of the Bill provides for the establishment or designation of Special Courts for the trial of offences under the Code.
Clause 114 of the Bill provides for the appeals and revisions from the Special Court to the High Court concerned.
Clause 115 of the Bill provides that subject to certain exceptions, the provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 shall apply to the proceedings before the Special Court.
Clause 116 of the Bill provides that a court can take cognizance of an offence under the Code only upon written complaint made by the Board, or an officer or person authorised by it.
Clause 117 of the Bill provides for the compounding of offences under the Code by court or Tribunal, as the case may be. It provides that the offences under the Code may be compounded by—(i) the Tribunal, either before or after the proceedings related to such offences are instituted before the court, or (ii) the court, before which such proceedings are pending. It further provides that a person cannot apply for compounding of an offence committed by him within a period of three years from the date on which a similar offence committed by him was compounded under this section.
Clause 118 of the Bill provides for the manner in which other regulated instruments would be issued or held through depositories. It further provides that the Board may in consultation with other regulatory authority specify the conditions and procedure of issuance and holding of other regulated instrument through depositories.
Clause 119 of the Bill provides for the manner of listing and trading of other regulated instruments. It also provides that the other regulated instruments which is listed on a stock exchange shall be listed, traded, cleared and settled in accordance with the provisions of this Code and shall be subject to other conditions that are specified by the Board in consultation with other regulated authority.
Clause 120 of the Bill enables the Board to enter into a memorandum of understanding with other regulatory authority for various purposes.
Clause 121 of the Bill provides for the general conditions applicable on the Board and other regulatory authority, while exercising their powers or performing their functions under this Chapter such as to facilitate investor participation, ensure investor protection, promote the orderly development of securities markets, etc.
Clause 122 of the Bill empowers the Board to take action against a person who are registered with other regulatory authority in case of contravention of the provisions of the Code. It also provides that where the Board is of the opinion that such person has contravened the provisions of the law under which it is registered, it shall inform the concerned other regulatory authority about the contravention for taking appropriate action.
Clause 123 of the Bill provides for grants by the Central Government to the Board.
Clause 124 of the Bill provides that the General Fund, established under section 14 of the Securities and Exchange Board of India Act, 1992, shall be deemed to be the Fund for the purposes of the Code.
Clause 125 of the Bill provides that the Investor Protection and Education Fund established under the Securities and Exchange Board of India (Investor Protection and Education Fund) Regulations, 2009 shall be deemed to be the Investor Protection and Education Fund for the purposes of the Code.
Clause 126 of the Bill provides for the Board to maintain accounts and audit of the accounts by the Comptroller and Auditor-General of India.
Clause 127 of the Bill provides for furnishing of returns and reports by the Board to the Central Government within the period of ninety days after the end of each previous financial year. It also provides that a copy of the report shall be laid before each House of Parliament.
Clause 128 of the Bill provides the establishment of a regulatory sandbox for development of new products, contracts, or services in the securities markets.
Clause 129 of the Bill provides for the regulation of the National Institute of Securities Markets for capacity building of intermediaries.
Clause 130 of the Bill provides that the Members, officers and employees of the Board to be public servants.
Clause 131 of the Bill provides for the power of the Central Government to issue directions to the Board.
Clause 132 of the Bill provides for the delegation of certain powers by the Board except the powers under sections 128, 146 and 149.
Clause 133 of the Bill empowers the Central Government to supersede the Board for the circumstances mentioned therein. It further empowers the Central Government to take over all powers and functions of the Board on being superseded which shall be exercised by such persons as the Central Government may direct. It also empowers the Central Government to reconstitute the Board by fresh appointment.
Clause 134 of the Bill provides for the requirement to maintain confidentiality of the regulatory data under the Code by the Board (its officers, employees) and its Members, a market infrastructure institution and a self-regulatory organisation (including their officers, employees and the members of their governing boards).
Clause 135 of the Bill empowers the Central Government, on the recommendation of the Board, to grant immunity to any person who is alleged to have contravened the provision of this Code or rules, regulations or bye-laws made thereunder subject to conditions mentioned therein.
Clause 136 of the Bill provides for the procedure for recovery of amounts in case of failure by any person by various mode provided therein.
Clause 137 of the Bill provides for the continuance of proceedings under the Code after the death of a person.
Clause 138 of the Bill provides for the bar of jurisdiction of courts in certain cases in respect of quasi-judicial proceedings under the Code.
Clause 139 of the Bill provides for the protection from the legal proceeding to the Central Government or any of its officers or the Board, any member of the Board or its officers and employees for any action taken in good faith.
Clause 140 of the Bill provides for an exemption to Board from paying certain taxes.
Clause 141 of the Bill provides that the power of the Board does not apply to the International Financial Services Centre.
Clause 142 of the Bill provides provisions of this Code shall be in addition to, and not in derogation of the provisions of any other law for the time being in force.
Clause 143 of the Bill provides that the Code will not apply in certain cases.
Clause 144 of the Bill empowers the Central Government to delegate its powers under the Code except the powers under sections 131,135 and 145.
Clause 145 of the Bill empowers the Central Government to make rules under the Code for various provisions enumerated therein. It further provides that the Central Government shall, before making any rules, comply with the condition of previous publication. It also empowers the Central Government to dispense with the requirements of previous publication in case of urgency in the public interest, for reasons to be recorded in writing.
Clause 146 of the Bill provides for the power of the Board to make regulations. In addition to the general powers of the Board to make regulations for carrying out the purposes of this Code, this provision provides a list of subject matter for which the specifications shall be through regulations.
Clause 147 of the Bill provides the procedure for issuing regulations by the Board. The Board shall, before making a regulation, invite public comment on the draft of the regulations. It further provides that the Board will provide an appropriate, reasonable period for inviting public comments and will also give a general statement of its response to the public comments. It also provides that this requirement may be dispensed with in case of urgency in the public interest, for reasons to be recorded in writing. It also provides that the Board shall periodically review the regulations made by it.
Clause 148 of the Bill provides that the rules, regulations, bye-laws and subsidiary instructions made under this Code be laid before the Parliament.
Clause 149 of the Bill provides the manner of issuing subsidiary instructions by the Board that clarify existing regulations or define the procedures ancillary to a regulation. It further provides that a subsidiary instruction can be issued by—(i) the Chairperson, individually or with a whole-time Member, or (ii) two whole-time Members. It also provides that the Board will also specify the manner and conditions for issuing subsidiary instructions.
Clause 150 of the Bill provides for the constitution of the Advisory Committees by the Board. It further provides that the Board may consult the Advisory Committee if it considers it necessary. It also provides that such consultation or advice shall not be binding.
Clause 151 of the Bill empowers the Central Government by order to remove difficulties that may arise in giving effect to the provisions of the Code. It further provides that no order shall be made after the expiry of a period of three years.
Clause 152 of the Bill provides for the repeal and savings of the existing enactments governing the securities markets and facilitates the transition from such repealed enactments to the provisions of the Code.
Clause 153 of the Bill provides that any reference to repealed enactments to be construed as a reference to the Code and the corresponding provisions.
Clause 154 of the Bill provides that the Economic Offences (Inapplicability of Limitation) Act, 1974 be amended in the manner provided in the First Schedule to align with the provisions of the Code.
Clause 155 of the Bill provides that the Prevention of Money-laundering Act, 2002 be amended in the manner provided in the Second Schedule to align with the provisions of the Code.
Clause 156 of the Bill provides that the Fugitive Economic Offenders Act, 2018 shall be amended in the manner provided in the Third Schedule to align with the provisions of the Code.
Clause 157 of the Bill provides that the Mediation Act, 2023 shall be amended in the manner provided in the Fourth Schedule to align with the provisions of the Code.
FINANCIAL MEMORANDUM
The Securities Markets Code, 2025, if enacted, is not likely to involve any expenditure, either recurring or non-recurring, from and out of the Consolidated Fund of India.
MEMORANDUM REGARDING DELEGATED LEGISLATION
1. Sub-clause (1) of clause 145 of the Bill empowers the Central Government to make rules for carrying out the provisions of the proposed legislation. Sub-clause (2) of the said clause specifies the matters in respect of which such rules may be made. These matters, inter alia, includes—
(a) the manner of appointment of Chairperson and Members under sub-section (3) of section 4; (b) the other terms and conditions of service of Chairperson and members under sub-section (3) of section 5; (c) the other functions of the Board under clause (z) of sub-section (2) of section 11; (d) the manner of crediting settlement amount to the Consolidated Fund of India under sub-section (8) of section 26; (e) the salaries, allowances and conditions of service of the officers and employees of the Tribunal under sub-section (3) of section 84; (f) the form, manner and fee for filing an appeal under sub-section (3) of section 85; (g) the other matters under clause (h) of sub-section (2) of section 86; (h) the manner of crediting all sums realised by way of penalty into Consolidated Fund of India under section 112; (i) the terms and conditions and the sums payable under sub-section (1) of section 117; (j) the form for maintaining proper accounts, other relevant records and the preparation of annual statement of account along with the accounts of the Investor Protection and Education Fund under sub-section (1) of section 126; (k) the time, form and manner of furnishing returns, statements and particulars in regard to any proposed or existing programme for the promotion and development of securities markets under sub-section (1) of section 127; (l) the form for submitting report, giving a true and full account of activities, policies and programmes during the financial year under sub-section (2) of section 127; (m) any matter which is to be or may be prescribed or in respect of which provisions is to be made by rules.
2. Sub-clause (1) of clause 146 of the Bill empowers the Board to make regulations for carrying out the provisions of the proposed legislation. Sub-clause (2) of the said clause specifies the matters in respect of which such regulations may be made. These matters, inter alia, includes—
(a) the other services for the purposes of the definition of depository services under sub-clause (iv) of clause (l) of section 2; (b) the form of records under clause (ze) of sub-section (1) of section 2; (c) the time and place, the rules of procedure of transaction of business at the meetings of the Board, including quorum and the manner of maintaining arrangements for recording, safe-keeping and for taking decisions and publication thereof under sub-section (1) of section 8; (d) such direct or indirect interest, including the interest of any family member, under sub-section (4) of section 8; (e) the qualifications, method of recruitment and the terms and conditions of service of officers and employees of the Board under sub-section (2) of section 9; (f) the manner for undertaking inspection of a securities markets service provider, a market participant or any other person associated with the securities markets under section 12; (g) the manner of seeking assistance by the Board of a securities markets service provider or an expert to assist the Investigating Officer under sub-section (1), the form of the order directing investigation under sub-section (2), the criteria and manner of quantification of unlawful gains or losses under sub-section (3) and the procedure of conducting investigation under sub-section (5), of section 13; (h) the form and manner of serving notice by the Investigating Officer under sub-section (6) of section 14; (i) the rank of officer to be designated as an adjudicating officer under sub-section (1) of section 17; (j) the manner for conducting adjudication proceedings under sub-section (4) of section 17; (k) the relevant document and particulars to be enclosed with a show cause notice under sub-section (1) of section 18; (l) the procedure, the criteria for distribution of disgorged amount, the order of priority and the other conditions to provide restitution from the disgorged amount under sub-section (2) of section 25; (m) the conditions, the fee, the time and manner of filing an application for settlement of proceedings initiated or to be initiated under sub-section (1), the members, the terms and conditions for constitution of committee for advising the Board under sub-section (2), the other factors for settlement proceedings under sub-section (3) and the manner for conducting settlement proceedings under sub-section (6), of section 26; (n) the form and manner, the eligibility criteria and fee payable and the period for rectification of the defects in the application for registration under sub-section (2) and the form and manner, the terms and conditions and the time period for issuing a certificate of registration and any additional conditions under sub-section (3), of section 28; (o) the form and manner and the conditions for surrendering the certificate of registration under sub-section (1), and the period of suspension or cancellation of such certificate and the other grounds for such suspension or cancellation under sub-section (2), of section 29; (p) the class or classes of investors under sub-section (1) of section 30; (q) the manner in which investment schemes shall be conducted, operated or promoted including the matters related to contribution or subscription made by an investor under sub-section (3) or section 32; (r) the manner of investment of funds raised or collected under sub-section (1), and the manner and extent of borrowing and issuing debt securities by pooled investment vehicles under sub-section (2), of section 33; (s) the manner of facilitating or providing services related to the issue, sale, purchase or any such dealings in securities under sub-section (1), and the manner and the period within which to charge brokerage, deliver securities and make payment to an investor under sub-sections (2), of section 34; (t) the fair disclosure of information and the frequency thereof under sub-section (1) and, the manner of furnishing information by a securities markets service provider, market participant or a person associated with securities markets under sub-section (2), of section 35; (u) the manner and the period to invest money by a securities markets service provider under sub-section (3) of section 35; (v) the form, manner and fee for registration as a market infrastructure institution under sub-section (2) and, the conditions for the bye-laws of the applicant, the form and other conditions for grant of registration to the applicant and the period for rectification of defects in the application for registration under sub-section (3), of section 37; (w) the manner in which the Board may order to cancel the certificate of registration of market infrastructure institutions under sub-section (1) of section 38; (x) such other matters under clause (u) of sub-section (2) of section 39; (y) the mechanisms under sub-section (2) of section 41; (z) the conditions under sub-section (1) of section 42; (za) the manner of management of the board of market infrastructure institution under sub-section (2) and the manner of demutualisation of market infrastructure institution under sub-section (3) of section 42; (zb) the manner of furnishing annual report and other information by market infrastructure institution to the Board under section 43; (zc) the manner of being admitted as member or client of member or principal under sub-section (1) of section 52; (zd) the conditions and procedures for issuance and holding of other regulated instrument through depositories under clause (b) of sub-section (1) of section 54; (ze) the manner of surrender of certificate of security or other regulated instrument under sub-section (1), the time period for completion of the process of dematerialisation and informing the depository under sub-section (2), and the period for dematerialisation of the certificate of securities under sub-section (4), of section 56; (zf) the other particulars to be maintained by depository under section 57; (zg) the rights and obligations of depositories, depository participants and issuers under sub-section (1), the eligibility criteria for admission of securities or other regulated instrument on depositories and the manner of holding or transfer of such securities and other regulated instrument under sub-section (2), the manner of exercising the rights and interest and any other operational or incidental matters under sub-section (3), the manner of maintaining records by a depository under sub-section (4), and the procedures and good practices under sub-section (5), of section 62; (zh) the eligibility criteria and requirements for securities to be offered to public and listed on stock exchange under sub-section (1), the conditions to be complied by every issuer intending to offer securities to the public or for listing under sub-section (2), the other conditions where securities are listed on stock exchange under sub-section (3) and the time period and manner in respect of repayment of all money under sub-section (4), of section 64; (zi) the requirements and other matters under sub- section (1) of section 65; (zj) the manner of delisting of securities by stock exchange under sub-sections (1) and the grounds for such delisting under sub-section (2), of section 66; (zk) the form and manner for implementing the delivery arrangements by a market infrastructure institution under section 69; (zl) the manner of making the investor charter and such other matters concerning the investors under section 71; (zm) the manner and the period for receiving, monitoring and redressing investor grievance under sub-section (1) and the period for informing the investor under sub-section (2), of section 72; (zn) the manner and timelines for the grievance redressal under sub-section (3) of section 73; (zo) the form and manner of filing a complaint to an Ombudsperson under sub-section (2) of section 74; (zp) the amount to be paid to the complainant as damages under clause (c) of sub-section (1) of section 75; (zq) the other fraudulent or unfair practices in the securities markets under clause (f) of section 92; (zr) the other activities which adversely affects the integrity of the securities markets under clause (g) of section 93; (zs) the conditions and procedures relating to the issuance and the manner of holding of other regulated instrument through depositories under sub-section (2) of section 118; (zt) the other conditions for listing, trading, clearance and settlement of other regulated instrument on a stock exchange under sub-section (2) of section 119; (zu) the grants and donations to other persons under clause (b) of sub-section (1) and the manner of administration and utilisation of the Investor Protection and Education Fund under sub-section (2), of section 125; (zv) the manner of establishing a regulatory sandbox under sub-section (1) and the conditions and procedure for making an application under clause (c) of sub-section (3), of section 128; (zw) the manner and conditions of issuing subsidiary instructions under sub-section (1) of section 149; (zx) the manner of the constitution of Advisory Committees under section 150; (zy) such other matter which is required to be, or may be, specified by regulations or in respect of which provision is to be made by regulations.
3. Sub-clause (1) of clause 39 of the Bill empowers a market infrastructure institution to make bye-laws for carrying out the provisions of the proposed legislation. Sub-clause (2) of the said clause enumerates the matters in respect of which such bye-laws may be made which includes—
(a) the appropriate mechanisms for safeguarding the interests of any investors in securities and beneficial owners thereof; (b) the manner of holding, custody, pledging, hypothecation, lending, borrowing, issue, transfer, trading, transmission, conversion, transformation, consolidation, switching, clearing, delivery, settlement and other dealings in securities; (c) the risk management and abuse prevention measures such as imposition of margins, position and price limits, circuit breakers, collateral management, auction of short positions, order restrictions, account suspensions, server placement and other technical requirements; (d) the particular bye-laws, the contravention of which shall make a contract entered into otherwise than in accordance with the bye-laws void under section 47; (e) the terms and conditions for accessing any services provided by the market infrastructure institution; (f) the listing of securities, the inclusion of any security for the purpose of dealings and the suspension or withdrawal of any such securities, and the suspension or prohibition of trading in securities; (g) the procedure for disbursing of interest, dividend, bonus and other monetary benefits arising from the holding, transfer, or any dealings in securities; (h) the norms of fair and time-bound disclosure of material information by issuers; (i) the internal control standards such as audits, review and monitoring; (j) the inter-se rights and obligations of members and market participants; (k) the terms, conditions and incidents of contracts, including the prescription of margin requirements, if any, and the conditions relating thereto, and the forms of contracts in writing; (l) the content, form and manner of executing member-client agreements; (m) the measures relating to regulation of fees charged by members, dealings by members for their own account, maintenance of separation of client funds and securities; (n) the process of accrediting or empanelling persons providing services in connection with any dealings in securities; (o) the procedure for conveying information to members and market participants; (p) the levy and recovery of fees and penalties; (q) the conduct of inspections, filing of information and such other matters in relation to regulation of its members; (r) the obligations of members to supply such information or explanation and to produce such documents relating to their business as may be sought by the market infrastructure institution; (s) the procedure for the settlement of claims or disputes or grievances including settlement by mediation or arbitration including through electronic means; (t) the manner of conducting proceedings against the members and market participants for committing breach of the bye-laws and provisions for suspension, expulsion of members and market participants and cancellation of agreements with the market infrastructure institution; (u) other matters as may be specified by regulations; (w) sub-section (5) of section 39 empowers the Board to make bye-laws over the matter enumerated under sub-section (2) thereof.
4. The matters in respect of which rules, regulations, subsidiary instructions or bye-laws, may be made or issued under the aforesaid provisions are matters of procedure and administrative detail and it is not practicable to provide for them in the Bill itself. The delegation of legislative power is, therefore, of a normal character.
