These proposals are part of the Securities Market Code Bill, which seeks to consolidate and replace three existing laws — the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996. The Bill has been referred to the Standing Committee on Finance for further deliberation.
Under the proposed framework, SEBI will be required to constitute a Reserve Fund, into which 25% of its annual surplus from the General Fund will be credited. This Reserve Fund will be used exclusively to meet the Board’s expenses.
After this allocation, the remaining portion of the annual surplus will be mandatorily transferred to the Consolidated Fund of India. It marks the first explicit legislative attempt to codify how SEBI’s surplus funds are to be utilised and shared with the exchequer, potentially altering the regulator’s long-standing financial autonomy.
Statutory timelines for investigations
In a significant shift, the Bill proposes for the first time a hard time bar of 180 days for the completion of SEBI investigations. Investigating Officers will be required to update the SEBI Board if an investigation report is not ready within this period and must formally record reasons for the delay.
The Bill also introduces an outer limitation period, barring the Board from directing inspections or investigations after the expiry of eight years from the date of default or contravention. Investigations beyond this period will be permitted only in exceptional circumstances — where there is a likelihood of systemic impact on the securities markets or when the matter is referred by another investigating agency.
Ombudsman and investor protection
To strengthen investor grievance redressal, the proposed law empowers the SEBI Board to designate one or more of its officers as Ombudspersons. These Ombudspersons will handle complaints and disputes involving investors, adding a quasi-independent layer to the existing redressal framework.
The Bill also mandates SEBI to specify an Investor Charter outlining the rights and protections available to investors. In addition, SEBI will be required to lay down a formal Investor Grievance Redressal Mechanism and direct intermediaries, service providers and issuers to establish similar mechanisms.
Among other key changes, the Bill proposes to increase the strength of the SEBI Board to up to 15 members, from the current nine, signalling a move towards more participatory governance. Minor offences under securities laws are proposed to be decriminalised, aligning with the broader government push to reduce criminal liability for procedural and technical lapses.
