New Markets Legislation Aims to Enhance Sebi’s Authority
Finance Minister Nirmala Sitharaman has unveiled the Securities Markets Code (SMC) Bill in the Lok Sabha, a significant legislative move aimed at enhancing the powers of the Securities and Exchange Board of India (Sebi). The bill proposes to decriminalize various minor violations, expand Sebi’s board size from nine to fifteen members, and establish clearer timelines for regulatory investigations. This comprehensive legislation is designed to streamline market regulations and improve investor protection, and it has been referred to the parliamentary standing committee on finance for further review.
Key Objectives of the SMC Bill
The Securities Markets Code Bill is set to consolidate three existing laws: the Securities Contracts (Regulation) Act of 1956, the Securities and Exchange Board of India Act of 1992, and the Depositories Act of 1996. By doing so, the government aims to create a more cohesive regulatory framework that reflects current market practices. One of the bill’s primary objectives is to limit criminal liability to serious offenses, such as significant market abuse and non-compliance with Sebi’s orders. Minor infractions will be decriminalized and instead subject to civil actions, which is expected to reduce the burden on the judicial system and allow for more efficient regulatory processes.
Enhancing Regulatory Efficiency
The SMC Bill introduces specific timelines for investigations and interim orders, ensuring that enforcement actions are completed in a timely manner. This initiative aims to provide greater clarity and certainty for market participants regarding regulatory actions. By establishing a structured approach to investigations, the bill seeks to enhance the overall efficiency of the regulatory framework. Additionally, the proposed legislation mandates public consultations for all binding instruments issued by Sebi, including regulations and by-laws from Market Infrastructure Institutions (MIIs), thereby promoting transparency and stakeholder engagement.
Strengthening Investor Protection
A significant focus of the SMC Bill is on bolstering investor protection and education. The legislation aims to make it mandatory for stakeholders to adhere to an investor charter, which will outline the rights and responsibilities of investors. Furthermore, the bill emphasizes the importance of effective and timely redressal of investor grievances. To support this, Sebi will promote training for intermediaries and market participants, while the National Institute of Securities Markets (NISM) will receive statutory recognition under the SMC to facilitate training, certification, and research in the securities sector.
Incorporating Global Best Practices
The SMC Bill also aims to align India’s securities regulations with global best practices in regulatory governance, accountability, and transparency. This includes the introduction of measures such as regulatory impact assessments to evaluate the potential effects of new regulations on the market. By adopting these practices, the government hopes to create a more robust and responsive regulatory environment that can adapt to the evolving needs of the financial markets. The SMC Bill represents a significant step towards modernizing India’s securities regulations and enhancing the overall integrity of the financial system.
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