Securities Markets Code (SMC) Bill, 2026

28 Jul 2026

Securities Markets Code (SMC) Bill, 2026: Key Provisions, Objectives, Committee Recommendations & Significance

The Securities Markets Code (SMC) Bill, 2026 is a landmark legislative initiative aimed at modernizing India's securities market regulations. The Bill seeks to consolidate multiple existing securities laws into a single comprehensive legal framework, making regulation simpler, more transparent, and investor-friendly.

Recently, the Parliamentary Standing Committee on Finance recommended several important amendments to the Bill, including stronger safeguards for due process, clearer criminal provisions, and a defined grievance redressal timeline while retaining the provision related to SEBI's surplus transfer to the Consolidated Fund of India.

For UPSC aspirants, the Securities Markets Code (SMC) Bill, 2026 is an important topic under Indian Economy, Financial Markets, Governance, and Current Affairs.

What is the Securities Markets Code (SMC) Bill, 2026?

The Securities Markets Code (SMC) Bill, 2026 is a proposed legislation that aims to consolidate India's securities regulatory framework by combining three major laws into a single code:

SEBI Act
Securities Contracts (Regulation) Act (SCRA)
Depositories Act

The objective is to create a unified legal framework that improves regulatory clarity, strengthens investor protection, and promotes efficient capital markets.

Why is the Securities Markets Code (SMC) Bill, 2026 Required?

India's securities market currently operates under multiple laws enacted at different times, leading to overlapping provisions and regulatory complexity.

The Securities Markets Code (SMC) Bill, 2026 seeks to address these challenges by:

Simplifying securities laws.
Reducing legal ambiguity.
Strengthening investor protection.
Modernizing regulatory mechanisms.
Enhancing market transparency.
Improving ease of compliance.
Promoting confidence among domestic and foreign investors.

The Bill also aims to balance regulatory powers with constitutional safeguards and parliamentary oversight.

Key Provisions of the Securities Markets Code (SMC) Bill, 2026

1. Consolidation of Securities Laws

The Bill merges:

SEBI Act
Securities Contracts (Regulation) Act
Depositories Act

into one comprehensive Securities Markets Code.

This creates a streamlined legal framework for India's securities markets.

2. Stronger Focus on Investor Protection

The Parliamentary Standing Committee recommended revising the preamble to explicitly include:

Investor protection
Market development
Effective regulation

This provides greater legal clarity regarding the objectives of the legislation.

3. Criminal Offences Must Be Defined by Parliament

One of the most significant recommendations is the removal of the clause allowing SEBI to create new criminal offences through regulations.

Instead,

Criminal offences must be clearly specified in the statute passed by Parliament.
This limits excessive delegation of legislative powers.
It strengthens constitutional accountability.

4. Clear Rules for Market Investigations

The committee recommended that:

Prior notice should generally be given before investigations.
Exceptions may be allowed where advance notice could lead to destruction or concealment of evidence.

This balances enforcement powers with procedural fairness.

5. Fixed 120-Day Ombudsperson Timeline

The Bill introduces a grievance redressal mechanism through an ombudsperson.

The committee recommended:

Complaints should ordinarily be resolved within 120 days.

This ensures faster dispute resolution for investors.

6. SEBI Surplus Transfer Retained

The committee retained the provision requiring SEBI to transfer a portion of its surplus funds to the Consolidated Fund of India.

However, it also emphasized preserving SEBI's institutional independence and operational efficiency.

Major Recommendations of the Parliamentary Standing Committee

The Parliamentary Standing Committee on Finance proposed several key changes to strengthen the Securities Markets Code (SMC) Bill, 2026. Its major recommendations include:

Sharper Preamble: The Committee recommended revising the preamble to clearly emphasize the Bill's objectives of investor protection, market development, and effective regulation.
Delete the Power to Create Criminal Offences Through Regulations: It proposed removing the provision that allowed SEBI to introduce new criminal offences through regulations, ensuring that criminal liabilities are defined only by Parliament through legislation.
Prior Notice for Investigations: The Committee suggested making prior notice the standard practice before investigations, while allowing exceptions in cases where advance notice could result in the destruction or concealment of evidence.
120-Day Ombudsperson Timeline: To improve investor grievance redressal, the Committee recommended that complaints handled by the ombudsperson should ordinarily be resolved within 120 days.
Retain SEBI Surplus Transfer Provision: The Committee retained the provision requiring SEBI to transfer a portion of its surplus funds to the Consolidated Fund of India, while emphasizing the need to preserve SEBI's institutional independence and accountability.

Significance of the Securities Markets Code (SMC) Bill, 2026

The proposed Code is expected to bring several long-term benefits:

Modernized securities regulation.
Greater legal certainty.
Better investor confidence.
Improved ease of doing business.
Transparent enforcement mechanisms.
Stronger institutional accountability.
Simplified regulatory compliance.
Better alignment with global financial market practices.

Conclusion

The Securities Markets Code (SMC) Bill, 2026 represents a significant step toward creating a modern, transparent, and unified regulatory framework for India's securities markets. By consolidating multiple laws, strengthening investor protection, and improving legal clarity, the Bill seeks to make India's capital markets more efficient and globally competitive. The Parliamentary Standing Committee's recommendations—particularly those limiting excessive delegation, ensuring due process, and setting a 120-day grievance redressal timeline—reinforce the principles of accountability and fairness. If enacted with these safeguards, the Securities Markets Code could play a pivotal role in enhancing investor confidence, promoting market integrity, and supporting India's long-term financial sector reforms.

Frequently Asked Questions (FAQs)

1. What is the Securities Markets Code (SMC) Bill, 2026?

The Securities Markets Code (SMC) Bill, 2026 is a proposed law that consolidates the SEBI Act, Securities Contracts (Regulation) Act, and Depositories Act into a single comprehensive securities law to improve market regulation and investor protection.

2. Why is the Securities Markets Code (SMC) Bill, 2026 important?

The Securities Markets Code (SMC) Bill, 2026 simplifies India's securities law framework, strengthens investor protection, improves regulatory clarity, and enhances transparency in capital markets.

3. What are the key provisions of the Securities Markets Code (SMC) Bill, 2026?

The key provisions include consolidation of securities laws, stronger investor protection, statutory criminal offences, prior notice for investigations, a 120-day ombudsperson timeline, and provisions regarding SEBI's surplus transfer.

4. What recommendations did the Parliamentary Committee make on the Securities Markets Code (SMC) Bill, 2026?

The committee recommended revising the preamble, removing SEBI's power to create criminal offences through regulations, ensuring due process during investigations, fixing a 120-day grievance redressal timeline, and retaining SEBI's surplus transfer provision.

5. How is the Securities Markets Code (SMC) Bill, 2026 relevant for UPSC?

The Securities Markets Code (SMC) Bill, 2026 is important for UPSC Prelims, GS Paper III, and interviews as it relates to financial sector reforms, capital market regulation, SEBI, investor protection, governance, and the Indian economy.