A parliamentary committee has recommended increasing the SEBI board size to 15 and extending the cooling-off period for senior officials to two years. These proposals under the Securities Markets Code Bill aim to strengthen market regulation and investor protection. Investors may note potential changes to investigation timelines and the formalization of investor rights through a mandatory charter.
Detailed Coverage
A parliamentary panel has put forward a series of comprehensive reforms for the Securities and Exchange Board of India (SEBI), aiming to reshape the regulatory environment for Indian markets. The proposals, which form part of the Securities Markets Code Bill, 2025, suggest expanding the SEBI board from its current strength of nine to fifteen members. This increase is intended to broaden the regulatory oversight capacity as the Indian financial market continues to grow in complexity and participation.
Stricter Cooling-Off Period and Regulatory Oversight
One of the most notable recommendations is to double the cooling-off period for SEBI’s chairperson and whole-time members to two years. This cooling-off period refers to the time former officials must wait before taking up other positions, a move designed to mitigate potential conflicts of interest and ensure regulatory independence. By extending this duration, the parliamentary committee seeks to build stronger safeguards against the movement of personnel between regulatory roles and private sector entities.
Adjustments to Investigation and Legal Timelines
Recognizing the challenges in handling intricate financial misconduct cases, the panel has suggested revising the timelines for investigative processes. While the initial draft of the bill proposed a 180-day window for concluding investigations, the committee has recommended extending this limit to one year. This change acknowledges the time-intensive nature of gathering evidence and processing complex market abuse probes.
Furthermore, the panel has proposed specific deadlines for grievance redressal and appeals. This includes setting a 120-day limit for the disposal of complaints by the ombudsperson and a 45-day deadline for condoning delays in appeals filed before the Securities Appellate Tribunal (SAT). These measures are intended to provide greater predictability for market participants involved in legal or regulatory disputes.
Investor Protection and Digital Assets
To better serve retail investors, the committee has strongly advocated for making the Investor Charter a mandatory requirement. This charter is expected to clearly define investor rights and outline fixed timelines for grievance redressal. The proposal also mandates that safeguards for retail investors during company delisting processes be integrated directly into the primary legislation, rather than through secondary regulations.
Additionally, the committee has urged the government to develop a regulatory framework for virtual digital assets, such as cryptocurrencies. It suggested an interim oversight mechanism to address potential regulatory gaps in this space. The panel also emphasized a clearer legal distinction between civil defaults and criminal market abuse, suggesting that criminal liability should be reserved only for the most severe and systemic misconduct. The next steps will involve the government reviewing these parliamentary recommendations as it advances the Securities Markets Code Bill toward final legislation.