Economic Survey flags Securities Markets Code as blueprint for stronger regulation

Securities Markets Code is a key step in modernising market regulation, noted the document.

• The Securities Markets Code, 2025 consolidates India's securities market laws
• SMC aims to boost transparency, accountability, and regulatory governance
• SEBI's board expanded and MIIs given statutory status under the new Code

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The Securities Markets Code, 2025 (SMC) is an important step towards consolidating the legal framework and strengthening the foundations of securities market regulation, noted the Economic Survey.

"The SMC’s framework extends beyond the securities market, serving as a potential model for regulatory governance across India’s wider financial and administrative sectors. Its principles-transparency, consultation, proportionality, and accountability-could guide the creation of other regulators or the reform of existing ones."

If implemented in both letter and spirit, the SMC could restore and strengthen trust among regulators, market participants, and investors. "The ultimate test will be how deeply these governance standards embed themselves into everyday regulatory practice and whether they inspire similar transformation across India’s regulatory landscape."

The Code repeals and replaces the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996, consolidating India’s securities market laws into a single framework. It covers areas such as rulemaking, adjudication, executive action, regulatory governance, investor protection, and the oversight of market infrastructure institutions (MIIs).

Reforms under the SMC are organised into three broad clusters. The first focuses on the delivery of regulatory services, with measures to make rulemaking more transparent and consultative through mandatory public consultations and periodic reviews. To address delays in enforcement, the Code limits the duration of interim orders and introduces clearer timelines and safeguards for investigations, inspections, and licensing.

The second cluster strengthens regulatory governance by expanding SEBI’s board, enhancing diversity of expertise, and codifying safeguards to preserve independence, including fixed tenures, eligibility norms, and cooling-off periods. Accountability is reinforced through greater disclosure, public access to regulations and orders, and periodic impact assessments and performance reviews.

The third reform area grants MIIs statutory status through mandatory registration, formally recognising their public role in market functioning. The Code allows SEBI to delegate certain regulatory powers to MIIs, subject to procedural safeguards, while establishing ongoing governance and supervisory standards.

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