Summary of this article
The Bill merges three existing securities laws into one code, expands what qualifies as securities, and allows Sebi and the RBI to regulate new instruments together
It tightens the regulatory framework with time limits for investigations, clearer enforcement processes, and civil penalties for minor lapses
Investors can expect better protection, faster grievance redressal, stronger accountability at Sebi
Finance Minister Nirmala Sitharaman introduced the Securities Markets Code Bill 2025 during the Winter Session of the Lok Sabha on December 18. The Bill seeks to merge the Securities and Exchange Board of India (Sebi) Act, 1992, the Depositories Act, 1996, and the Securities Contracts (Regulation) Act, 1956 into a single unified framework to simplify regulation and strengthen investor protection.
One of the major changes under the Code is the expansion of the statutory definition of “securities”. The definition now includes hybrid instruments, electronic gold receipts, zero-coupon instruments, and onshore rupee bonds issued by multilateral institutions. The Bill also introduced the concept of “other regulated instruments”. This will allow Sebi and sectoral regulators such as the Reserve Bank of India (RBI) to work together on the issuance, holding, listing, and trading of such instruments.
For the first time, the Code introduced a statutory limitation period for regulatory action. Sebi will not be able to order inspections or investigations after eight years from the date of the alleged violation, except in cases involving systemic market impact or references from investigating agencies. The Bill also laid down procedural safeguards, including a clear separation between investigative and adjudicatory functions, and set defined timelines for enforcement proceedings.
The Code gave explicit statutory backing to disgorgement of unlawful gains. At the same time, it decriminalises several minor and procedural contraventions. These will now attract monetary penalties instead of criminal prosecution. However, serious offences such as fraud, insider trading, and market manipulation will continue to carry criminal liability.
The Bill also proposed changes to Sebi’s structure. The regulator’s Board will have up to 15 members, with at least five whole-time members. It also requires the government to appoint at least three members with expertise in securities markets.
Securities Markets Code Bill 2025: What Should Investors Expect
The Code aims to make the investing environment simpler, more transparent, and more investor-friendly.
Vinayak Magotra, product head and founding team at Centricity WealthTech, says, the Code is less about immediate market impact and more about building long-term confidence in India’s regulatory framework. “By consolidating existing market laws into a single, unified code, the Bill aims to reduce overlaps and simplify compliance,” says Magotra.
Santosh Meena, head of research at Swastika Investmart, says that retail investors are expected to benefit from an Investor Charter and a more structured, time-bound grievance redressal framework, which could improve access to remedies and reduce delays in dispute resolution.
Both experts also highlight the decriminalisation of minor and procedural lapses as a significant shift. By treating such defaults as civil violations rather than criminal offences, the Code reduces the risk of penal action for technical errors while maintaining strict punishment for serious misconduct such as fraud and insider trading.
The expansion of Sebi’s Board, stricter conflict-of-interest disclosures, cooling-off periods for leadership, and a more formal consultation process signal a move towards transparent, rule-based, and time-bound regulation, they say.
Vinayak Magotra adds that the introduction of regulatory sandboxes links regulatory certainty with innovation. This will allow new investment products and platforms to be tested in a controlled environment, potentially expanding the range of investment options available to investors over time.
“Ultimately, this consolidation reduces regulatory red tape for brokers and companies,” Meena says. “This should lead to faster transaction processing, lower compliance costs, and a more user-friendly stock market experience,” he adds.
