Illustration showing India’s Parliament, SEBI, stock exchanges, and investors symbolizing consolidation of securities laws under the Securities Markets Code Bill 2025.

The Securities Markets Code Bill, 2025 marks a historic step toward unified and modern regulation of India’s capital markets.(Representing ai image)

How the Proposed Securities Markets Code Bill, 2025 Is Set to Consolidate India’s Securities Laws and Reshape Capital Markets

Dr. Sanjaykumar Pawar

Introduction: Why Securities Law Reform Matters Now
India’s Securities Regulation: A Fragmented Legacy
What Is the Securities Markets Code (SMC) Bill, 2025?
Why Consolidation Was Inevitable: Economic and Market Context
Key Structural Changes Proposed Under the SMC Bill, 2025
- 5.1 A Stronger and Broader SEBI Board
- 5.2 Addressing Conflict of Interest
Decriminalisation and Ease of Compliance: A Paradigm Shift
Investor-Centric Reforms: From Charter to Ombudsman
Impact on Market Infrastructure Institutions and Intermediaries
Inter-Regulatory Coordination: Reducing Silos in Financial Governance
Alignment with International Best Practices
Economic Implications: Market Efficiency, Investor Confidence, and Growth
Risks, Challenges, and Critical Concerns
Visual Snapshot: What Changes and What Remains
Frequently Asked Questions (FAQs)
Conclusion: A Defining Moment for India’s Capital Markets
References and Sources

1. Introduction: Why Securities Law Reform Matters Now

Capital markets are often described as the circulatory system of a modern economy, and for good reason. When they work smoothly, money moves efficiently from savers to businesses, fueling innovation, entrepreneurship, and job creation. But when regulations are outdated or scattered across multiple laws, the system slows down. Compliance becomes costly, legal uncertainty rises, and investor confidence can suffer.

India’s capital markets today are very different from what they were three decades ago. They are larger, more complex, digitally driven, and deeply connected to global financial systems. However, the legal framework governing these markets has remained fragmented, relying on multiple overlapping securities laws designed for a much simpler era. This mismatch has made regulation harder to navigate for companies, investors, and regulators alike.

The Securities Markets Code (SMC) Bill, 2025, introduced in Parliament in December 2025, aims to change this. By merging three major securities laws into a single, principle-based regulatory framework, the Bill represents a major step toward modern securities law reform in India. Its goals are clear: strengthen investor protection, reduce regulatory complexity, enhance transparency, and improve ease of doing business. At a time when India aspires to be a global financial hub, this reform could not be more timely.

2. India’s Securities Regulation: A Fragmented Legacy

India’s securities market has grown from a small, paper-based system into one of the world’s largest and most technology-driven financial ecosystems. However, the legal framework governing this market has not evolved at the same pace. Before the introduction of the Securities Market Code (SMC) Bill, regulation was spread across three major legislations, creating a fragmented and often inefficient structure.

Key Legislations Governing Securities Markets

Before the SMC Bill, India’s securities regulation rested on the following laws:

Securities Contracts (Regulation) Act, 1956 (SCRA)
Enacted to regulate stock exchanges and securities trading, the SCRA focused primarily on contracts and exchange recognition in a largely manual trading environment.
Securities and Exchange Board of India Act, 1992 (SEBI Act)
This law established SEBI as the market regulator, granting it supervisory and enforcement powers to protect investors and promote orderly market development.
Depositories Act, 1996
Introduced to enable dematerialization of securities, this Act supported the shift from physical certificates to electronic holding and settlement.

Each of these laws was effective for its time and addressed specific market needs. However, together they formed a patchwork regulatory architecture rather than a unified framework.

Challenges Created by a Fragmented Framework

The coexistence of multiple securities laws led to several structural and practical issues:

Overlapping definitions
Terms like “securities,” “intermediaries,” and “market participants” were defined differently across laws, creating interpretational confusion.
Duplicate compliance requirements
Market intermediaries often had to comply with similar obligations under multiple Acts, increasing costs and administrative burden.
Ambiguities in enforcement powers
SEBI’s authority to investigate, penalize, or issue directions sometimes overlapped or conflicted across statutes, leading to legal challenges and delays.
Inefficiency in addressing modern market practices
New-age instruments, digital trading platforms, and complex derivatives did not fit neatly into older legislative categories.

Why the Old Framework Felt Outdated

An analogy explains the problem well: regulating today’s digital, high-speed securities market using these laws is like controlling modern air traffic with rules written for propeller aircraft. The system may still function, but it is slow, inefficient, and carries avoidable risks.

The Need for Regulatory Consolidation

As India’s capital markets became more integrated, globalized, and technology-driven, the limitations of this fragmented legacy became increasingly visible. A modern securities ecosystem demands:

Clear and uniform definitions
Streamlined compliance structures
Strong, unambiguous enforcement powers
Laws aligned with current and future market realities

This fragmented legacy ultimately set the stage for reform, making a consolidated and forward-looking securities law not just desirable, but necessary.

3. What Is the Securities Markets Code (SMC) Bill, 2025?

The Securities Markets Code (SMC) Bill, 2025 is a major reform initiative aimed at reshaping how India’s securities markets are regulated. Instead of operating under multiple overlapping laws, the Bill proposes to consolidate, rationalize, and replace three legacy securities laws into one unified and modern legal framework. This move reflects India’s evolving capital markets and the need for clearer, faster, and more investor-friendly regulation.

Introduced after years of consultation and regulatory experience, the SMC Bill builds on an idea first announced in the Union Budget 2021, adapting it to today’s technology-driven and globally connected markets.

Why the Securities Markets Code Bill, 2025 Matters

India’s securities laws have historically developed in silos, leading to duplication, regulatory gaps, and compliance complexity. The SMC Bill, 2025 seeks to address these challenges by creating a single securities markets code that is easier to understand, enforce, and comply with.

This reform is especially important as India’s equity, debt, and derivative markets grow in size, participation, and international relevance.

Core Objectives of the SMC Bill, 2025

The Bill is designed around several clear and market-focused objectives:

Strengthen investor protection
Ensures better safeguards, transparency, and fair treatment for retail and institutional investors.
Reduce regulatory fragmentation
Merges multiple securities laws into one framework, eliminating overlaps and inconsistencies.
Decriminalize minor procedural violations
Shifts away from criminal penalties for technical or procedural lapses, focusing instead on civil penalties and compliance.
Improve governance and accountability
Enhances regulatory clarity and strengthens the oversight role of market regulators.
Promote ease of doing business
Simplifies compliance requirements for companies, intermediaries, and market participants.
Align with global best practices
Brings India’s securities regulation closer to international standards followed in mature financial markets.

A Step Toward Modern Market Regulation

The Securities Markets Code Bill, 2025 reflects lessons learned from past enforcement, rapid digitization, and the rise of new financial instruments. It recognizes that outdated legal structures cannot effectively regulate modern markets driven by algorithmic trading, fintech platforms, and cross-border investments.

By emphasizing clarity, proportionality, and efficiency, the Bill aims to create a balanced regulatory environment—one that protects investors without stifling innovation.

In essence, the SMC Bill, 2025 is not just a legal consolidation exercise; it is a strategic reform to future-proof India’s securities markets. By simplifying laws, improving governance, and encouraging responsible participation, the Bill seeks to build trust, transparency, and global competitiveness in India’s financial ecosystem.

4. Why Consolidation Was Inevitable: Economic and Market Context

Regulatory consolidation in India’s financial markets was not a sudden policy choice—it was an economic necessity shaped by rapid market evolution. As capital markets expanded in size, speed, and sophistication, fragmented and outdated laws began to slow growth rather than protect investors. Below are the key forces that made consolidation inevitable, explained in a clear and practical way.

1. Scale and Complexity of Modern Markets

India today hosts millions of retail investors, alongside institutional players, proprietary traders, and global funds. Financial instruments have also multiplied—derivatives, algorithmic trading systems, REITs, InvITs, ETFs, and cross-border listings are now mainstream.
Older regulatory frameworks were designed for a much simpler market with fewer participants and products. Managing today’s scale and complexity under multiple overlapping laws created confusion, regulatory gaps, and inconsistent enforcement. Consolidation helps create a single, coherent framework that matches the realities of modern capital markets.

2. Technology-Driven Market Transformation

Legacy financial laws were drafted long before dematerialisation, high-frequency trading, digital onboarding, and fintech platforms became central to market operations. As technology accelerated trading speeds and reduced entry barriers, regulatory lag became more visible.
Consolidated regulations allow policymakers to update rules faster, reduce duplication, and respond more effectively to emerging risks such as cyber threats, algorithmic manipulation, and data governance issues. This alignment between technology and regulation is essential for sustainable market growth.

3. Growing Global Integration

India’s capital markets are increasingly integrated with global financial systems. Foreign portfolio investors (FPIs) and international institutions expect regulatory clarity, predictable timelines, and uniform compliance standards.
Fragmented laws often resulted in delays, interpretational disputes, and higher legal risk—factors that discourage long-term foreign investment. Consolidation improves ease of doing business, enhances investor confidence, and positions India as a competitive global investment destination.

4. Rising Compliance Costs

Multiple overlapping laws significantly increased compliance costs for intermediaries, listed companies, and regulators alike. Firms often had to comply with similar requirements under different statutes, without any meaningful improvement in market integrity.
A unified regulatory structure reduces duplication, simplifies reporting, and allows regulators to focus on substantive risk management rather than procedural enforcement.

Economic Impact of Consolidation

From an economic perspective, regulatory consolidation:

Reduces transaction costs
Improves capital allocation efficiency
Enhances overall market efficiency
Supports innovation without compromising investor protection

In essence, consolidation was inevitable because modern markets demand clarity, speed, and coherence—qualities that fragmented regulation can no longer deliver.

5. Key Structural Changes Proposed Under the SMC Bill, 2025

The SMC Bill, 2025 introduces significant structural reforms aimed at strengthening the governance and credibility of India’s securities market regulator. These changes reflect the growing complexity of financial markets and the need for a more transparent, accountable, and resilient regulatory framework. Two of the most impactful reforms relate to the composition of the SEBI Board and the way conflicts of interest are addressed.

5.1 A Stronger and Broader SEBI Board

One of the central reforms under the SMC Bill, 2025 is the expansion and diversification of the SEBI Board. Under the earlier regime, the board consisted of only nine members, with relatively limited representation and a narrower governance approach. The new bill proposes increasing the board size to 15 members, marking a clear shift toward inclusive and expert-driven regulation.

The proposed structure ensures representation from the Government, the Reserve Bank of India (RBI), and multiple whole-time experts with hands-on experience in financial markets, law, economics, and technology. This broader mix of expertise is designed to reflect the realities of a rapidly evolving securities ecosystem that now includes complex derivatives, fintech platforms, algorithmic trading, and global capital flows.

From a governance perspective, a larger and more diverse board strengthens institutional checks and balances. Decision-making is less likely to be concentrated in a small group, reducing the risk of regulatory blind spots or unilateral actions. In a market as large and sophisticated as India’s, this broader oversight enhances policy depth, improves regulatory responsiveness, and supports long-term market stability. Overall, the strengthened SEBI Board under the SMC Bill, 2025 is positioned to deliver more balanced, informed, and credible regulation.

5.2 Addressing Conflict of Interest

Another critical reform under the SMC Bill, 2025 is the introduction of a stricter and more transparent conflict of interest framework. Regulatory credibility depends heavily on the perceived independence of decision-makers, and the new Code directly addresses this concern.

Under the proposed rules, all board members are required to disclose direct and indirect interests, including financial or professional interests held by family members. This ensures that potential conflicts are identified early and assessed transparently. Importantly, members who have a conflict of interest in a particular matter are barred from participating in discussions or decisions related to that issue.

The bill also empowers the government to remove board members if a conflict of interest is found to prejudice the discharge of their official duties. This accountability mechanism sends a strong signal that ethical governance is non-negotiable.

By reinforcing transparency and ethical conduct, these reforms significantly enhance regulatory credibility. For investors, both domestic and international, this translates into greater trust in SEBI’s decisions and, ultimately, a more confident and stable securities market under the SMC Bill, 2025.

6. Decriminalisation and Ease of Compliance: A Paradigm Shift

One of the most transformative aspects of recent regulatory reforms is the reclassification of violations, which marks a clear departure from the earlier, heavily punitive framework. For decades, businesses—especially startups and first-time market participants—operated under the constant fear that even small procedural lapses could trigger criminal consequences. The new approach changes that mindset entirely by aligning enforcement with intent, materiality, and actual harm to the market.

At the heart of this reform is a rational, business-friendly enforcement model that recognises a crucial reality: not all violations are equal, and not every compliance failure deserves criminal punishment.

Two Buckets of Contraventions

To ensure clarity and fairness, violations are now broadly divided into two distinct categories:

Procedural and Minor Violations
These include technical lapses such as delayed filings, clerical errors, or minor disclosure gaps that do not mislead investors or distort market outcomes.
- No criminal liability
- Civil penalties only
By removing the threat of imprisonment for such errors, regulators reduce compliance anxiety while still maintaining discipline through monetary penalties.
Market Abuse (Serious Violations)
This category covers offences such as fraud, insider trading, manipulation, and deliberate misinformation—actions that directly undermine investor trust and market integrity.
- Civil penalties
- Criminal liability where public interest is harmed
Here, the law continues to act firmly, ensuring that bad actors face meaningful consequences when their conduct causes real economic or systemic damage.

This bifurcation reflects a proportionate enforcement philosophy—one that punishes intent and impact, not paperwork mistakes. It acknowledges that over-criminalisation discourages honest participation, while under-enforcement erodes trust. Striking the right balance is key to sustainable market growth.

Economic Impact:
The shift toward decriminalisation has far-reaching economic benefits. Reduced fear of criminal prosecution lowers entry barriers for entrepreneurs, encourages startups to formalise and list, and enables companies to focus on growth rather than defensive compliance. Investors benefit from deeper, more dynamic markets, while regulators can allocate enforcement resources more effectively toward serious misconduct.

In essence, this paradigm shift promotes ease of doing business without compromising market integrity. By fostering a culture of compliance rather than fear, the reform lays the foundation for innovation, capital formation, and long-term economic resilience—proving that smart regulation can be both firm and fair.

7. Investor-Centric Reforms: From Charter to Ombudsman

The proposed SMC Bill marks a decisive shift in how investor rights are recognized and protected in India’s capital markets. For the first time, investor protection is not treated as a secondary regulatory objective but as a statutory right embedded in law. These investor-centric reforms aim to rebuild trust, improve accountability, and give retail investors a system that actually works for them.

1. Investor Charter Codified into Law

One of the most significant reforms is the Investor Charter being given legal backing. Earlier, investor rights existed largely as guidelines or regulatory promises. Under the SMC Bill, these rights become legally enforceable.

Why this matters:

Investors clearly know their rights and obligations
Regulators and intermediaries are legally bound to honor these rights
Transparency becomes a legal requirement, not a courtesy

This empowers retail investors who previously felt lost in complex market structures.

2. Time-Bound Investor Grievance Redressal Mechanism

The Bill introduces a mandatory, time-bound grievance redressal framework, ensuring that complaints cannot be ignored or delayed indefinitely.

Key benefits:

Fixed timelines for grievance resolution
Reduced uncertainty and follow-up fatigue for investors
Stronger accountability for brokers, intermediaries, and issuers

For investors, this reform transforms complaints from “emails into the void” into structured legal claims with deadlines.

3. Independent Ombudsman System

Another landmark reform is the establishment of an independent Ombudsman, separate from enforcement and investigation wings.

Why independence matters:

Ensures neutral and unbiased dispute resolution
Prevents conflict of interest within regulatory bodies
Builds confidence among small and first-time investors

This mirrors systems used in banking and insurance, where ombudsmen act as accessible justice mechanisms for consumers.

4. Mandatory Grievance Systems for Intermediaries and Issuers

The SMC Bill makes it compulsory for all intermediaries and issuers to maintain robust internal grievance redressal systems.

Impact on the market:

Forces proactive compliance rather than reactive damage control
Improves service quality across the investment ecosystem
Reduces regulatory overload by resolving issues at source

What This Means for Retail Investors

For retail investors, these reforms represent a shift from informal complaint desks to a consumer court–like framework within capital markets. The SMC Bill signals a future where investor protection is structured, enforceable, and accessible.

In essence, the Bill doesn’t just regulate markets—it restores investor confidence by placing fairness, accountability, and justice at the center of capital market governance.

8. Impact on Market Infrastructure Institutions and Intermediaries

The proposed Bill brings a significant structural shift in how India’s securities market ecosystem is regulated. By introducing a consolidated registration framework and enabling functional delegation, it directly impacts Market Infrastructure Institutions (MIIs) and intermediaries, strengthening efficiency, transparency, and regulatory clarity.

1. Consolidated Registration Framework: A Unified Approach

One of the most important reforms under the Bill is the creation of a single, harmonised registration framework covering:

Stock exchanges
Clearing corporations
Depositories
Market intermediaries
Pooled investment vehicles

This unified system replaces fragmented and overlapping regulatory processes. As a result:

Institutions face lower compliance complexity
Approval timelines become faster and more predictable
Regulatory arbitrage is reduced

For intermediaries, this ensures uniform standards, improving trust and consistency across the securities market.

2. Strengthened Role of Market Infrastructure Institutions (MIIs)

MIIs such as stock exchanges, clearing corporations, and depositories are no longer just operational entities. Under the Bill, SEBI can delegate certain regulatory and supervisory functions to them. This includes:

Monitoring member compliance
Enforcing operational discipline
Handling routine regulatory oversight

This empowers MIIs to act as first-line regulators, allowing quicker issue resolution and better ground-level supervision.

3. Enhanced Role of Self-Regulatory Organisations (SROs)

The Bill also recognises the importance of Self-Regulatory Organisations (SROs). By delegating specific responsibilities to SROs:

Industry expertise is leveraged more effectively
Sector-specific challenges are addressed faster
Compliance becomes more practical and market-oriented

SROs help bridge the gap between regulators and participants, promoting responsible self-governance.

4. Improved Regulatory Efficiency Through Decentralisation

This decentralised framework allows SEBI to move away from micro-management. Instead, SEBI can focus on:

Systemic risk monitoring
Market stability and investor protection
Policy formulation and long-term oversight

Routine operational supervision handled by MIIs and SROs ensures faster decision-making and reduced regulatory bottlenecks.

5. Positive Impact on Market Confidence and Growth

Overall, the Bill enhances:

Regulatory certainty for intermediaries
Operational efficiency across institutions
Investor confidence through stronger oversight

By balancing centralised policy control with decentralised execution, the reforms support a more resilient, transparent, and scalable capital market ecosystem.

The Bill’s impact on Market Infrastructure Institutions and intermediaries marks a progressive step in securities market regulation. Through consolidated registration and strategic delegation, it creates a system that is efficient, risk-focused, and future-ready, positioning India’s capital markets for sustainable growth.

9. Inter-Regulatory Coordination: Reducing Silos in Financial Governance

India’s financial system has grown rapidly in scale and complexity, but its regulatory architecture still operates in silos. Different regulators oversee different segments—SEBI for securities markets, RBI for banking and payments, IRDAI for insurance, and PFRDA for pensions. While each plays a critical role, limited coordination often slows innovation and creates regulatory gaps. The proposed SMC Bill addresses this challenge by promoting inter-regulatory coordination and reducing fragmentation in financial governance.

Why Regulatory Silos Are a Problem

Regulatory silos can lead to:

Overlapping jurisdictions, where the same product faces multiple compliance regimes
Regulatory arbitrage, where firms exploit gaps between regulators
Delays in product approvals, especially for hybrid or technology-driven instruments
Inconsistent consumer protection standards across markets

As financial products increasingly blend securities, payments, and digital assets, these silos become more costly for both regulators and market participants.

How the SMC Bill Enables Better Coordination

The SMC Bill provides an enabling framework rather than rigid rules, allowing regulators to collaborate more effectively. Key features include:

Structured coordination between SEBI, RBI, and other regulators
The Bill encourages information-sharing, joint consultations, and aligned regulatory responses for products that cut across domains.
Seamless listing of “other regulated instruments”
This flexibility allows exchanges to list new or hybrid instruments already regulated elsewhere, without forcing them into outdated classifications.
Interoperability across platforms
By supporting interoperable market infrastructure, the Bill reduces duplication and improves efficiency across trading, clearing, and settlement systems.

Boosting Financial Innovation

Strong inter-regulatory coordination in India is essential for fostering financial innovation. Modern products such as:

fintech-driven investment tools
tokenised assets
blended insurance-investment products
cross-market derivatives

do not fit neatly within one regulator’s mandate. A coordinated approach ensures:

faster time-to-market for innovative products
clearer compliance expectations for businesses
better risk oversight without stifling growth

Benefits for Markets and Investors

Reducing silos in financial governance leads to:

More efficient capital markets
Lower compliance costs
Greater investor confidence
Consistent regulatory standards

For investors, this means better access to diversified products with stronger protections. For regulators, it enables smarter supervision in an interconnected financial ecosystem.

The SMC Bill marks an important step toward integrated financial regulation in India. By encouraging coordination between SEBI, RBI, and other regulators, enabling seamless listing of regulated instruments, and promoting platform interoperability, it helps break down institutional silos. In doing so, it lays the foundation for a future-ready, innovation-friendly financial system that can keep pace with evolving markets while safeguarding stability.

10. Alignment with International Best Practices

The SMC Bill represents a significant step toward aligning India’s regulatory framework with global best practices, fostering transparency, accountability, and investor confidence. By incorporating several internationally recognized standards, the Bill aims to modernize India’s market governance and make it more competitive on a global scale.

1. Regulatory Impact Assessment (RIA)
A key feature of the SMC Bill is the adoption of Regulatory Impact Assessments, a tool widely used in the UK, EU, and Australia. RIA ensures that any proposed regulation is carefully evaluated for its economic, social, and environmental impact before implementation. This evidence-based approach reduces unnecessary regulatory burdens and promotes efficient decision-making. For investors, this signals a predictable and stable regulatory environment, a crucial factor when considering cross-border investments.

2. Arm’s-Length Separation Between Investigation and Adjudication
The Bill introduces a clear arm’s-length separation between investigative and adjudicatory functions. This separation is a hallmark of robust international regulatory systems, ensuring that investigations are impartial and that adjudication is free from bias. By adopting this principle, India strengthens the integrity of its enforcement processes, thereby enhancing trust among domestic and foreign stakeholders.

3. Transparent Consultation Processes
Another critical aspect of the SMC Bill is the emphasis on transparent consultation processes. Stakeholders, including businesses, investors, and civil society, are invited to provide input before the enactment of new regulations. This participatory approach mirrors practices in mature markets like the EU, where consultation is mandatory for major regulatory reforms. Transparent consultations not only improve the quality of regulations but also boost confidence that the regulatory framework is fair and inclusive.

4. Accountability Mechanisms
The Bill also introduces robust accountability mechanisms to ensure regulatory actions are fair, consistent, and justified. Clear reporting requirements, oversight committees, and appeals processes align India’s system with international norms, reinforcing the credibility of regulatory institutions.

Global Alignment and Investor Confidence
By incorporating these best practices, the SMC Bill brings India closer to global standards observed in the UK, EU, and Australia. Such alignment is expected to enhance the attractiveness of Indian markets for foreign investors, providing a predictable, transparent, and investor-friendly regulatory environment.

In conclusion, the SMC Bill not only modernizes India’s regulatory architecture but also positions the country as a reliable destination for global capital, strengthening its role in the international financial ecosystem.

11. Economic Implications: Market Efficiency, Investor Confidence, and Growth

The new Bill carries significant economic implications that can transform market dynamics and boost investor confidence. By creating a framework that is simpler, transparent, and investor-friendly, the Bill is expected to enhance market efficiency and support long-term economic growth.

1. Improved Capital Formation
One of the key benefits of the Bill is its potential to improve capital formation. By simplifying regulations and making compliance easier for companies, businesses can raise funds more efficiently. This helps companies expand operations, invest in new projects, and create jobs, ultimately driving economic growth.

2. Reduced Cost of Compliance
Compliance with outdated or complex regulations can be expensive for businesses. The Bill aims to reduce these costs by streamlining reporting requirements and providing clearer guidelines. Lower compliance costs mean companies can allocate resources to innovation and expansion rather than bureaucratic processes. This makes the market more attractive to both domestic and international investors.

3. Increased Retail Participation
Simpler rules and more transparent processes encourage retail investors to participate in the market. When everyday investors feel confident and understand the investment framework, participation grows. Increased retail investment strengthens market liquidity and creates a more balanced and robust financial ecosystem.

4. Attraction of Long-Term Foreign Investment
The Bill is designed to make the market more appealing to long-term foreign investors. Stable, transparent, and predictable regulations reduce risks for international investors looking to enter the market. By attracting foreign capital, the economy benefits from technology transfer, expertise, and a diversified funding base that supports sustainable growth.

5. Strengthened Market Resilience
A market with clear, fair, and efficient regulations is better able to withstand economic shocks. The Bill strengthens market resilience, ensuring that fluctuations or crises do not destabilize investor confidence. A resilient market encourages both short-term and long-term investments, which is critical for steady economic growth.

In simple terms, better rules create better markets. When markets are transparent, efficient, and investor-friendly, they support faster, more inclusive growth. By improving capital formation, reducing compliance costs, increasing retail participation, attracting foreign investment, and strengthening resilience, the Bill lays the foundation for a more dynamic and sustainable economic future.

12. Risks, Challenges, and Critical Concerns

No reform is without challenges. While legislative changes aim to strengthen financial oversight and protect investors, successful implementation depends on addressing several risks and operational hurdles.

1. Transition Costs for Intermediaries

One of the most immediate challenges is the transition cost for financial intermediaries. Brokers, asset managers, and other market participants may face significant expenses in upgrading systems, adopting new compliance procedures, and training staff. These costs, if not managed carefully, could impact operational efficiency and even market participation. Ensuring a smooth transition is essential to prevent disruptions and maintain investor confidence.

2. Risk of Regulatory Overreach

With enhanced powers granted to SEBI, there is a potential risk of regulatory overreach. While stronger authority is designed to improve market governance, unchecked enforcement could lead to unintended consequences, such as stifling innovation or creating compliance burdens for smaller firms. Maintaining a balanced approach between effective oversight and market freedom is critical to prevent friction between regulators and intermediaries.

3. Capacity-Building Within SEBI and MIIs

Reforms often demand significant capacity-building within SEBI and Market Infrastructure Institutions (MIIs). Staff need training on new regulations, technology adoption, and advanced monitoring techniques. Without adequate resources and skilled personnel, even well-intentioned reforms may fail to achieve their objectives. A strong focus on institutional strengthening is therefore necessary to support regulatory effectiveness.

4. Ensuring Ombudsman Independence

A key concern in investor protection is the practical independence of the Ombudsman system. While legal provisions may guarantee autonomy, real-world execution requires robust safeguards to prevent influence from regulators or market intermediaries. Independent and transparent functioning of the Ombudsman is essential to maintain trust and ensure fair grievance redressal.

Effective implementation will be as important as legislative intent. Addressing these challenges—transition costs, regulatory overreach, institutional capacity, and Ombudsman independence—can determine whether reforms succeed in improving market efficiency and protecting investors. Policymakers and market participants must collaborate to navigate these risks thoughtfully, ensuring that reforms deliver their intended benefits without unintended disruptions.

By proactively managing these risks, the financial ecosystem can achieve stronger governance, increased transparency, and improved investor confidence, ultimately fostering a resilient and well-regulated market environment.

13. Visual Snapshot: What Changes and What Remains

SMC Reform Visual Snapshot

Visual Snapshot: What Changes and What Remains under SMC

Flowchart: Consolidation of Three Acts into SMC

This flowchart illustrates how the Securities, Market, and Investor Protection Acts have been merged into the SMC framework.

Compliance Framework: Old vs New

Aspect	Old Framework	SMC Framework
Regulatory Oversight	Separate authorities for each Act	Unified SEBI oversight under SMC
Reporting Frequency	Quarterly & Annual Reports	Real-time & Annual Reporting
Investor Protection Mechanism	Fragmented Ombudsman system	Centralized independent Ombudsman
Compliance Penalties	Varied by Act	Harmonized penalties across all intermediaries

Investor Grievance Redressal under SMC

This diagram shows the structured flow of investor complaints from submission to resolution under the SMC framework.

Visuals for Readers:

Flowchart showing consolidation of three Acts into SMC
Table comparing old vs new compliance framework
Diagram of investor grievance redressal under SMC

(Visuals help non-expert readers grasp regulatory architecture quickly.)

14. Frequently Asked Questions (FAQs)

Q1. Does the SMC Bill increase SEBI’s power?
Yes, but with enhanced accountability and governance safeguards.

Q2. Will minor violations still lead to jail?
No. Most procedural lapses are decriminalized.

Q3. How does this help retail investors?
Through statutory investor charter, ombudsman, and faster grievance redressal.

Q4. Is this beneficial for startups and new listings?
Yes. Simplified compliance lowers entry barriers.

Q5. When will the Code come into force?
After Parliamentary approval and notified implementation.

15. Conclusion: A Defining Moment for India’s Capital Markets

The Securities Markets Code Bill, 2025 represents a structural leap forward in India’s financial regulation. By consolidating laws, simplifying compliance, and strengthening investor protection, it addresses long-standing inefficiencies while preparing markets for future growth.

If implemented thoughtfully, the Code can become the constitutional framework of India’s capital markets—supporting innovation, inclusion, and integrity in equal measure.

16. References and Sources

Securities Markets Code Bill, 2025 (Parliament of India)
Securities and Exchange Board of India (SEBI) publications
Union Budget 2021 policy announcements
Legal commentary from Saraf & Partners and CMS INDUSLAW
Indian Express Business Report, December 20, 2025

Securities Markets Code Bill 2025: How India Is Unifying Securities Laws