SEBI Board members to disclose their interest under new Securities Markets Code Bill

Union Finance Minister Nirmala Sitharaman speaks in the Lok Sabha during the Winter session of Parliament (file photo)
| Photo Credit:
Sansad TV/PTI

A member of SEBI (Securities and Exchange Board of India) board will be asked to disclose any interest even that of his family member, while participating in the decision making, under a new proposed Bill. Also, the market regulator will have to transfer its surplus to the government.

The proposed law, once enacted, will replace the Securities Contracts (Regulation) Act, the Securities and Exchange Board of India Act, 1992 and the Depositories Act, 1996. Now, the Bill will be examined by a select committee before taken for consideration and passage.

According to the Statement of Objects and Reasons of the Bill, “The Code seeks to eliminate conflict of interest by requiring the Members of the ‘Board’ to disclose any ‘direct or indirect’ interest while participating in decision-making.” Clause of the bill says: “Any Member, who has such direct or indirect interest, including the interest of any family member, as may be specified by regulations, in any matter coming up for consideration at a meeting of the Board shall, as soon as possible after the said interest has come to his knowledge, disclose the nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of the meeting of the Board, and such Member shall not take any part in any deliberation or decision of the Board with respect to that matter.“ Here ‘Board’ means SEBI.

Further, the new Bill enables the ‘Board’ to maintain a reserve fund and “transfer the surplus, if any, to the Consolidated Fund of India.” Other regular, Reserve Bank of India is already transferring the surplus and it has become key component of non-tax revenue for the Central Government.

The Code seeks to strengthen the regulatory mechanism of the ‘Board’ by providing a transparent and consultative process for issuing any subordinate legislation. It also requires periodic review of such regulations for their proportionate and effective implementation and regulatory impact assessment studies.

It streamlines the adjudication procedure and ensures that all quasi-judicial actions are undertaken through a single adjudication process after an appropriate fact-finding exercise. The Code maintains an arm’s length separation between inspection or investigation and adjudication proceedings and defines timelines for investigations and interim orders for a time-bound completion of the enforcement process.

According to the Statement, as a significant progressive step, the Code decriminalises certain contraventions of minor, procedural and technical nature into civil penalties to facilitate the ease of doing business and to reduce the compliance burden. The civil penalties are anchored to unlawful gains or losses caused with a view to ensure appropriate and adequate response to the gravity of the contraventions.

“It promotes standardisation in quantifying unlawful gains and losses to investors and fosters objectivity in undertaking enforcement actions like penalty imposition. However, punishment for market abuse is provided to deter persons from committing contraventions that adversely affect the market integrity. Further, the Code provides restriction period for initiating inspection or investigation to avoid delayed enforcement measures,” the statement said.

The Code further seeks to strengthen investor protection, promote investor education and awareness, and ensure effective and time-bound redressal of investor grievances. “It enables effective and prompt resolution of investor grievances by introducing the concept of an Ombudsperson as a comprehensive platform for redressal of any unresolved grievances,” the statement said. The Code also enables the Board to establish a Regulatory Sandbox to facilitate innovation in financial products, contracts and services. Furthermore, an enabling framework is established for the inter-regulatory coordination of other regulated instruments to facilitate a seamless process for listing of such instruments, the statement added.

Published on December 18, 2025