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A Parliamentary Standing Committee has recommended a series of measures to strengthen the legal sustainability and governance framework of the Securities and Exchange Board of India (SEBI). The panel has called for clearer statutory provisions, proportionate enforcement mechanisms, enhanced investor protection measures and stronger safeguards against conflicts of interest. It has also recommended expanding SEBI's board and reducing excessive reliance on subordinate legislation, with the aim of making the securities market regulatory framework more transparent, accountable and legally robust.
A Parliamentary Standing Committee on Finance has recommended several changes to the proposed Securities Markets Code, seeking to strengthen the legal foundation of the Securities and Exchange Board of India's (SEBI) enforcement framework while enhancing regulatory accountability and investor protection. The recommendations form part of the committee's review of the proposed legislation that seeks to consolidate key securities market laws into a single code.
Among its key recommendations, the committee has proposed that SEBI's board strength be increased from the existing nine members to as many as 15. According to the panel, a broader board would improve regulatory oversight, strengthen institutional decision-making and support the regulator in addressing the growing complexity of India's securities markets.
The committee has also recommended extending the cooling-off period for the SEBI chairperson and whole-time members from one year to two years before they can accept other employment. The proposal aims to minimise potential conflicts of interest and reinforce public confidence in the independence of the market regulator.
To make SEBI's enforcement actions more legally sustainable, the panel has suggested that important policy matters, including criminal liability and key investor rights, should be explicitly provided for in the primary legislation rather than being left to subordinate regulations. It cautioned against excessive delegation of legislative powers, observing that greater statutory clarity would reduce legal uncertainty and improve the durability of regulatory actions when subjected to judicial scrutiny.
The committee further recommended distinguishing civil regulatory violations from serious criminal market abuse so that criminal prosecution is reserved for systemic and intentional misconduct. It also proposed that monetary penalties should remain proportionate to the gravity of violations, ensuring fairness while maintaining deterrence.
Investor protection features prominently in the panel's recommendations. It has proposed making an Investor Charter mandatory, clearly defining investor rights, grievance redressal timelines and regulatory responsibilities. The committee also suggested incorporating safeguards for retail investors directly into the proposed law instead of leaving such protections to subsequent regulations.
The Securities Markets Code seeks to replace the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992 and the Depositories Act, 1996 with a unified principles-based legal framework. The Parliamentary Standing Committee stated that its recommendations are intended to create a regulatory regime that is more transparent, accountable, predictable and investor-centric while ensuring that SEBI's enforcement powers rest on a stronger statutory foundation.
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