Standing Committee backs enhanced SEBI powers, calls for stronger checks under Securities Markets Code
New Delhi, July 23
The Standing Committee on Finance has broadly backed the Securities Markets Code, 2025, but has pressed for a sharper, more accountable regulatory framework, with SEBI at the centre of market supervision, investigation and enforcement.
The report underscores that the proposed code "entrusts additional statutory responsibilities" to SEBI and gives the market regulator expanded powers to protect investors, regulate the securities market and set guiding principles for implementing the code.
The committee's most important recommendation on SEBI's role is that the regulator should retain strong operational authority, but with clearer statutory guardrails.
It noted that SEBI is the "principal regulator of the securities market" and says it should continue to exercise "wide-ranging regulatory, supervisory, investigative and enforcement powers".
At the same time, the panel has favoured tighter controls on exceptional powers so that SEBI's authority remains effective without becoming arbitrary.
Among the key changes, the committee has recommended that the Code be redrafted so that SEBI can initiate inspection or investigation after the prescribed limitation period only in narrowly defined cases.
On this point, the report says: "A mere reference by an investigating agency should not, by itself, constitute a sufficient ground for reopening a matter after the expiry of eight years".
It further recommends objective guiding principles to govern such extraordinary action, arguing that the power should be exercised only where there are "reasonable grounds to believe" there is a serious market abuse or systemic impact.
The committee has also endorsed SEBI's enhanced rule-making role, particularly in the governance of market infrastructure institutions. It notes that the Code "enables SEBI to prescribe the detailed requirements" through regulations and says this gives the regulator flexibility to respond to changing market conditions while maintaining the principle of diversified ownership.
The report also records that regulations framed by SEBI would be subject to public consultation and parliamentary scrutiny, which it sees as an important transparency safeguard.
On the broader architecture, the panel has welcomed the consolidation of the securities law framework but has asked for more precision in drafting and stronger institutional checks. It wants SEBI's appointment, adjudication and delegation powers to be backed by clearer procedures, greater transparency and better separation of functions.
The committee has argued that these safeguards are essential to preserve the "independence, credibility and effectiveness" of the regulator.
In effect, the Standing Committee has sent a clear message: SEBI should get stronger statutory powers under the new code, but those powers must be accompanied by tighter rules, clearer language and objective standards to prevent misuse and strengthen investor confidence.
— ANI
Reader Comments
I work in finance and this is refreshing. India's markets have grown so much, we need a regulator that can act decisively but also be accountable. The public consultation and parliamentary scrutiny aspect gives me confidence as an investor. Transparency is key.
While I support stronger SEBI powers, I'm a bit worried about the 'reasonable grounds to believe' clause being too vague. Who defines what's reasonable? We've seen how such provisions can be misused by other regulators. Hope the final bill has clearer definitions. 👀
This is a solid move. The consolidation of securities laws into one code has been long overdue in India. Multiple overlapping acts have caused confusion for years. SEBI with clearer powers and accountability - that's the sweet spot. Progressive step forward.
My concern is about the 'separation of functions' recommendation. In practice, how will SEBI maintain independence if there's too much parliamentary oversight? We need a strong regulator that can act fast in a crisis, not one that's bogged down by political interference. Just my two paise. 🤔
As a small investor, I welcome this. The stock market needs a watchdog with teeth but also one that follows rules itself. The Hindenburg-Adani saga showed us that regulatory gaps exist. Let's hope this code actually translates into better protection for retail investors like me. 🙏
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