The Parliamentary Standing Committee has submitted recommendations on the proposed Securities Markets Code (SMC) that aim to enhance SEBI's enforcement framework by making it more structured and legally sustainable. According to reports from The Hindu BusinessLine, the committee's recommendations introduce stronger procedural safeguards while retaining the regulator's broad enforcement powers. Legal experts note that these changes recalibrate rather than curtail SEBI's powers, ensuring the regulator retains comprehensive information-gathering, investigation, interim-relief and remedial authority while exercising these powers more systematically.
The committee has proposed several significant modifications to the draft legislation, including deleting a provision that would have allowed SEBI to define new criminal offences through regulations. As reported by The Hindu BusinessLine, the recommendations introduce functional separation between investigation and adjudication, extend the probe period from 180 days to one year, strengthen investor grievance mechanisms, and tighten procedural safeguards around enforcement. These changes are designed to create a more structured, time-bound and constitutionally grounded enforcement architecture while maintaining SEBI's broad investigative powers.
The extended investigation period from 180 days to one year reflects the practical reality that most investigations require significantly longer to conclude, according to Bharat Vasani, Senior Advisor – Corporate Laws at Cyril Amarchand Mangaldas. As reported by The Hindu BusinessLine, the changes include requirements to record reasons for extensions and safeguards around investigation notices. These procedural disciplines are expected to improve decisional consistency and reduce avoidable litigation while maintaining accountability in enforcement actions.
Legal experts emphasize that while the recommendations strengthen procedural discipline, they may create new challenges. Rohit Jain from Singhania & Co noted that while SEBI retains broad powers, their exercise becomes more structured through recorded reasons, periodic review of interim orders, and clearer appellate routes. However, as reported by The Hindu BusinessLine, deleting Clause 93(g) could leave enforcement gaps if new forms of market manipulation emerge, requiring Parliament to keep market abuse provisions updated with evolving markets.
The recommendations may generate litigation in specific areas, including the qualified provision under Clause 58(2) that allows challenges to depository records in cases of fraud or technical glitches. According to The Hindu BusinessLine, the recommendation that SEBI be empowered to both enhance and reduce Adjudicating Officer penalties under Clause 21 could face challenges as creating a parallel appellate mechanism competing with the Securities Appellate Tribunal's jurisdiction. These areas require precise statutory demarcation to avoid conflicts and maintain clear regulatory boundaries.
