India’s Securities Code Could Quiet Markets Without Saying a Word

India has finally taken a fragmented body of securities law and consolidated it into a single statute that promises coherence, speed, and clearer lines of accountability. The Securities Markets Code, 2025 Bill is currently before Parliament's Standing Committee on Finance, which will hear views from the Department of Economic Affairs, the National Stock Exchange of India, and the Bombay Stock Exchange.

The consolidation carries consequences beyond legislative tidiness. The Bill places rulemaking, investigation, adjudication and settlement under one institutional roof. This concentration delivers efficiency but raises questions about checks and separations that matter most when enforcement pressure rises.

What the Bill does is to bring together the Securities and Exchange Board of India Act, the Securities Contracts (Regulation) Act, the Depositories Act, and key enforcement and penalty provisions that were previously scattered across statutes and amendments. Rules governing listing, trading, clearing and settlement, intermediary registration, investigation, adjudication and penalties will now sit inside a single Code rather than across separate Acts.

The Code significantly expands the functional reach of the securities regulator. Rulemaking, inspection, investigation, interim directions, adjudication, settlement, disgorgement and restitution are all brought under a single legislative roof. The obvious upside to consolidation is that a unified statute reduces interpretive arbitrage across overlapping laws and lowers compliance friction caused by layering.

But there are issues, too.

For instance, the new code requires a final order within 180 days, but by the time it arrives, the damage is done. Interim orders are designed as temporary brakes, applied early and lifted once facts are established. In reality, those brakes tend to stay on. Though the Code requires a final order within 180 days, by the time a final order arrives, prices have adjusted, relationships have cooled, and capital has already found somewhere else to go.

The settlement framework too faces similar tensions.

The Code allows settlement applications at any stage of proceedings, including after interim orders are in place. It strengthens settlement mechanisms and bars appeals against settlement orders, favouring speed and finality over iterative interpretation. What can, though, disappear in the process is jurisprudence. Over time, negotiated outcomes replace tested legal reasoning, leaving markets with fewer reference points about how contested provisions will be applied. This could increase reliance on private legal counsel rather than established case law.

With fewer precedents to guide behaviour and more room for interpretation, caution seeps in. Companies talk a little less, lawyers are consulted a little more, and boards begin to choose the safer path. Ideas still surface, but they are tested twice. First for commercial logic, and then for how they might read in an enforcement file years later. No heavy hand is needed for this shift. It is a natural response to the structure in place.

To its credit, the draft does recognise these risks. It places repeated emphasis on proportionality, deterrence and investor protection, and builds in requirements for impact assessments and public disclosure of orders.

When investigation, adjudication and settlement sit within a single institutional ecosystem, separation relies less on formal barriers and more on internal culture. That works well in benign conditions. It is tested when markets are stressed, issues get personality-driven, and enforcement pressure rises. There is also a quieter repositioning embedded in the Code. By writing investor charters, grievance redressal mechanisms, ombudsmen and restitution directly into statute, the regulator moves beyond umpire to service provider. Expectations from stakeholders will rise accordingly, and enforcement will be judged not only on fairness, but on responsiveness and visibility.

The inter-regulatory provisions reinforce the same theme. The Code allows action against entities regulated by other authorities where securities-market impact is alleged. This reduces arbitrage and reflects the reality of financial conglomerates. It also makes compliance exposure cumulative rather than siloed.

The Code aims to build a modern market regulator suited to deeper capital markets and broader retail participation. Fragmented enforcement was never going to scale with ambition. Yet, concentrated discretion increases tail risk, even when exercised carefully. That is why deliberations at the Standing Committee matter. Once the Bill clears the Committee, the space to recalibrate internal checks narrows sharply.

Markets will be watching not just whether the Bill is approved by Parliament, but also what its most powerful stakeholders say before it is.