In a significant step towards reshaping India’s capital market regulatory architecture, the Centre has introduced the Securities Markets Code (SMC) Bill, 2025 in the Lok Sabha. The Bill was tabled by Finance Minister Nirmala Sitharaman and aims to clearly define the enforcement reach of the capital market regulator SEBI, introduce statutory timelines for investigations, and reduce prolonged regulatory uncertainty for market participants.
According to the government, the proposed legislation seeks to replace three existing laws—the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996—with a single, unified capital markets law. The Bill has been referred to a parliamentary standing committee for detailed scrutiny.
Eight-year statutory limit on inspections and investigations
Under the SMC Bill 2025, SEBI will be barred from ordering inspections or investigations in cases where the cause of action is more than eight years old from the date of the proposed order. However, this limitation will not apply to matters that have a systemic or widespread impact on the securities market.
Market experts believe this provision will bring greater certainty around legacy transactions and provide relief to companies and intermediaries that often face prolonged regulatory action for older matters.
180 days for SEBI to complete investigations
The Bill also introduces a time-bound enforcement framework. Key provisions include:
- SEBI must complete investigations within 180 days
- Any delay must be recorded in writing, stating specific reasons
- Extension of time will require approval from a whole-time member of SEBI
In addition, the validity of interim orders will be capped at 180 days. In exceptional cases—where judicial proceedings or investigations remain pending—such orders may be extended, but only up to a maximum of two years.
Relief for institutions in legacy cases
According to officials familiar with the matter, the eight-year statutory cap is expected to provide legal certainty to older transactions. Institutions will no longer remain under regulatory scrutiny indefinitely, a move that could improve ease of doing business and enhance investor confidence in the regulatory framework.
Changes in SEBI’s financial framework
The SMC Bill 2025 also proposes key changes to SEBI’s financial management structure. Under the proposed framework:
- SEBI will be required to transfer 25% of its annual surplus into a dedicated reserve fund
- This reserve fund will be used exclusively to meet the regulator’s operational expenses
- The remaining surplus will be transferred to the Consolidated Fund of India
Estimates suggest SEBI’s general fund currently stands at around ₹3,000–4,000 crore.
Ombudsman-led grievance redressal mechanism
To strengthen investor protection, the Bill provides for an Ombudsman-based grievance redressal system. SEBI will be empowered to appoint one or more of its officers as Ombudsman.
The Ombudsman will be responsible for receiving investor complaints, examining them, and facilitating their resolution. At present, investor grievances are handled through SEBI’s SCORES platform and the Online Dispute Resolution (ODR) mechanism.
Potential increase in tribunal workload
As per the proposed framework, investors must first seek resolution through the internal grievance redressal mechanism of the concerned service provider or issuer for 180 days. If the complaint remains unresolved, the investor may approach the Ombudsman within 30 days.
However, stakeholders have cautioned that a large volume of pending cases currently at the SCORES and ODR levels could eventually move to the Ombudsman stage. Further, if Ombudsman orders are challenged before the Securities Appellate Tribunal (SAT), it could significantly increase the tribunal’s workload.
Will SEBI’s powers actually be diluted?
A key question surrounding the SMC Bill 2025 is whether it dilutes SEBI’s authority. Regulatory experts argue that the Bill does not weaken the regulator’s powers, but rather places them within clearly defined limits and timelines, enhancing transparency, predictability, and accountability.
If enacted, the Bill is expected to create a more structured and time-bound regulatory environment, offering greater clarity to investors while maintaining SEBI’s ability to act decisively in cases with systemic market implications.
