India's Securities Code 2025: Consolidation Achieved, Transformative Vision Lacking

Securities Markets Code 2025: A Step Towards Clarity, Not Revolution

The Securities Markets Code, 2025, enacted on January 12, 2026, successfully consolidates India's complex web of securities regulations into a single legislative framework. This move aims to simplify, modernize, and rationalize oversight for market participants, intermediaries, and issuers, promising enhanced legal certainty. The code integrates previously disparate laws governing regulators, market contracts, and settlement infrastructure. This consolidation is expected to reduce interpretive complexities, particularly in cross-statute enforcement, allowing for more coherent application of rules.

Functional Framework and Enforcement Enhancements

A significant improvement lies in the code's functional classification of market actors, shifting away from entity-centric silos towards a more performance-based structure. The statutory recognition and integration of Self-Regulatory Organizations (SROs) is a notable positive development. Furthermore, the code introduces clearer delineations in enforcement processes, statutorily separating inspection, investigation, adjudication, and settlement. Strict timelines for investigations and interim orders, coupled with the exclusion of adjudicating officers from investigative stages, enhance procedural fairness and reduce legal uncertainty for all parties involved.

Proportionality and Settlement Finality Strengthened

Enforcement mechanisms are bolstered by the express incorporation of proportionality, aligning Indian practices with international standards. Factors such as intent, duration, investor harm, and cooperation now guide penalty assessments. The framework also better integrates disgorgement and restitution. Crucially, the code strengthens the legal foundations for settlement finality and netting. By prioritizing clearing corporations' rights and providing statutory certainty to settlement outcomes, it substantially reduces residual insolvency risks, a vital consideration for growing and increasingly interconnected Indian markets.

Lingering Concerns: Vision and Delegation

Despite its merits, the code stops short of being a truly transformative market-design statute. Its approach to contract regulation remains conservative, retaining traditional classifications of spot, forward, and derivative contracts rather than re-anchoring rules around core principles like transparency and risk management. A notable structural weakness is the extensive delegation of core market structure and investor classification issues to subordinate instruments and executive discretion. Investor protection, while emphasized, leans heavily on post-facto grievance handling rather than proactive measures for informed participation and market integrity. Concerns also persist regarding transparency in settlement regimes, as settlement orders are insulated from appeal without explicit requirements for detailed reasoning.

Governance and Future Outlook

The code largely preserves the existing governance framework between the Central government and the securities regulator. While such provisions previously existed, their consolidation raises questions about potential long-term institutional risks as markets gain political salience. The code also lacks a clear first-principles vision for securities markets, treating innovation as an accommodation rather than a core objective and remaining restrained on global market structure debates. Ultimately, the Securities Markets Code, 2025, is more effective at administering existing markets coherently than at shaping future ones, marking it as a significant consolidation but an incomplete generational reform.