Framing Lens

If you invest in stocks, mutual funds, or any other securities, this Code would give you a formal grievance channel through SEBI and access to an Ombudsperson if you have a complaint against a broker, exchange, or other market participant. For entities regulated by SEBI, investigations into violations can only be initiated within eight years of the alleged contravention — after that window, SEBI cannot open a new investigation, unless the case has systemic market impact.

What Could Change
  • Retail investors would have access to a formal SEBI grievance redressal mechanism and an Ombudsperson for complaints against market participants.
  • Brokers, investment advisors, and other intermediaries would face monetary penalties rather than criminal prosecution for most procedural violations.
  • SEBI investigations into past violations would be time-limited to eight years from the date of the alleged contravention.
  • SEBI's board would expand from nine to fifteen members, with tighter rules on conflicts of interest including interests of board members' family members.

What It Does

The Bill repeals three Acts and consolidates their provisions into a single Code. Key structural changes: the number of central government-appointed members on the SEBI board increases from five to eleven, raising total SEBI membership from nine to fifteen; conflict of interest disclosure requirements expand from members who are company directors to all members with any direct or indirect interest as specified by regulation, including interests of family members, and the central government gains power to remove a member whose interests are likely to prejudice their functions; adjudicating officers must be appointed from SEBI's own Chairperson, whole-time members, and officers, and must not have participated in the inspection or investigation of the case or considered any settlement application by the entity under investigation; SEBI is barred from initiating any inspection or investigation more than eight years after the date of contravention, with exceptions for cases with systemic market impact or cases referred by investigating agencies; SEBI gains explicit power to establish investor grievance redressal mechanisms, direct service providers to constitute their own, and appoint an Ombudsperson; and criminal penalties are removed for most violations, replaced with monetary penalties, while imprisonment is retained for non-compliance with adjudicating officer orders or investigating officer directions, and for market abuse, which the Bill defines as insider trading, defrauding investors, dealing in securities while possessing non-public information, or using power to manipulate market prices.

Key Provisions

Consolidation of Three Acts
Repeals the Securities Contracts (Regulation) Act 1956, SEBI Act 1992, and Depositories Act 1996 and consolidates them into a single Code, retaining most existing provisions.
Expanded SEBI Board Composition
Increases central government-appointed members from five to eleven, of whom at least five must be whole-time members. Raises total SEBI membership from nine to fifteen.
Broader Conflict of Interest Rules
Expands disclosure requirements to all members with any direct or indirect interest, including interests of family members. Adds central government power to remove members whose interests are likely to prejudice their functions.
Adjudicator Independence Requirement
Adjudicating officers must be appointed from SEBI's own personnel and must not have participated in the inspection or investigation of the case, or considered any settlement application by the entity under investigation.
Eight-Year Limitation Period
Bars SEBI from initiating inspection or investigation more than eight years after the date of contravention. Exceptions apply for cases with systemic market impact or cases referred by investigating agencies.
Investor Grievance Redressal and Ombudsperson
Explicitly empowers SEBI to establish investor grievance redressal mechanisms, direct service providers to constitute their own mechanisms, and appoint an Ombudsperson to redress grievances.
Replacement of Criminal Penalties
Removes criminal penalties for most violations, replacing them with monetary penalties. Retains imprisonment for non-compliance with adjudicating officer orders and for market abuse, defined as insider trading, defrauding investors, dealing on non-public information, and price manipulation.

Primary Sources

PRS Legislative Research — Bill Tracker Sansad Digital Portal — Lok Sabha

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