A parliamentary panel has recommended a two-year cooling-off period for SEBI’s Chairperson and Whole-Time Members before they join market-related entities. The report also highlights the urgent need for a regulatory framework for cryptocurrencies to protect retail investors from fraud and market manipulation.
Detailed Coverage
A parliamentary committee has proposed significant governance changes for the Securities and Exchange Board of India (SEBI) in its latest report on 'The Securities Markets Code, 2025'. The panel recommended that the SEBI Chairperson and Whole-Time Members observe a two-year cooling-off period before accepting positions at entities related to the securities market. This move is designed to prevent potential conflicts of interest and ensure that high-ranking officials do not transition immediately from regulatory roles to private firms they once supervised.
Regulatory Focus on Virtual Digital Assets
Alongside governance reforms, the panel addressed the growing concerns surrounding virtual digital assets, or cryptocurrencies. The committee noted that the proposed Securities Markets Code uses a definition of securities that is neutral to the underlying technology, but it does not currently cover digital assets that fall outside the traditional legal definition of securities or derivatives. This regulatory gap has created a grey area that the committee warns may expose investors to risks such as fraud, market manipulation, and a lack of clear channels for resolving grievances.
Call for Interim Oversight
Given the rapid rise in retail participation in digital assets, the panel urged the government to conduct a comprehensive study to establish a robust statutory framework. Because creating new legislation can be a lengthy process, the committee suggested that the government consider an interim approach. This could involve the use of Self-Regulatory Organizations that would function under the supervision of an official regulator. These organizations would be expected to enforce minimum standards for how companies govern themselves, provide transparency to users, and disclose risks, all aimed at enhancing investor protection. The committee emphasized that without such oversight, the current uncertainty allows for regulatory arbitrage, where market participants may exploit the lack of clear rules to their advantage. Investors and market participants will be tracking whether these recommendations are adopted into the final version of the Securities Markets Code, as they could reshape the regulatory environment for both traditional market intermediaries and digital asset platforms in India.