The Unified Securities Markets Code (SMC), which is in the drafting phase, is being designed to decriminalise multiple provisions under key financial market legislations, according to a government official. The new code aims to consolidate and replace the SEBI Act, 1992; the Depositories Act, 1996; the Securities Contracts (Regulation) Act (SCRA), 1956; and the Government Securities Act, 2007.
"A total of seven provisions are likely to be decriminalised. Three provisions in the SEBI Act, two in the Depositories Act, and two under the SCRA have been shortlisted for decriminalisation during the bill drafting. These fall under two sections under Sebi Act, and one section each under SCRA and Depositories Act,” the official told Moneycontrol.
The SMC will also seek to streamline the legal framework by reducing the number of sections across the four Acts, simplifying compliance for businesses and financial institutions, the official added.
Approximately seven provisions in the key legislations governing India’s financial markets are expected to undergo decriminalisation under this upcoming legislation. This is part of a broader strategy to reduce the criminal liabilities attached to various offences, making penalties less severe and promoting ease of doing business in the country, he said.
The finance ministry's consultations with the Securities and Exchange Board of India (Sebi) have been completed and the legislative department is drafting the Bill.
The SMC was proposed by Finance Minister Nirmala Sitharaman in the Union Budget for 2021-22. It is aimed at streamlining regulations, easing compliance burdens, and improving the overall business environment for market participants. After the Bill is drafted it will be vetted by the law ministry. A Cabinet approval is also likely to be sought soon, an official had said earlier.
Once the SMC Bill is passed in Parliament, the four existing Acts will be repealed.
Benefits
Decriminalising certain offences reduces the fear of criminal liability for minor or technical violations, which can be burdensome for businesses. It makes the regulatory environment more conducive for investment, allowing businesses to operate with more confidence and focus on growth.
A less punitive regulatory framework can attract more participants, especially startups and foreign investors.
Many financial offences are procedural or administrative in nature. Decriminalising such provisions allows regulatory authorities to focus on serious fraud or misconduct rather than minor infractions, improving the overall focus on market integrity.
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