India's Securities Markets Code Sees Key Changes After Stakeholder Input

New Delhi: The government is learnt to have agreed to several key changes in the proposed Securities Markets Code (SMC), including extending securities market investigation timelines from 180 days to one-year, empowering depositories to rectify records, and clarifying that the Centre's power to supersede market infrastructure institution boards would be exercised on Sebi's recommendation.

The changes were recommended by various stakeholders including Sebi and others during deliberations between the Parliamentary Standing Committee on Finance, headed by BJP MP Bhartruhari Mahtab. The panel is holding deliberations with the Department of Economic Affairs on the proposed law and is expected to submit its report to the Lok Sabha Speaker ahead of the Monsoon Session.

According to a presentation made before the committee by the DEA officials, it was suggested that the stakeholder consultation process generated 1,055 comments, including 665 unique comments.

Of these, 62 suggestions were accepted, 584 did not find favour, while 19 were considered already addressed in the draft Bill.

One of the key changes relates to investigations. The Finance Ministry has indicated to agree to revisit the proposed 180-day deadline and may extend it to 365 days for probes. It came after stakeholders argued that complex cases involving insider trading, market manipulation and securities fraud may require more time.

The government has also agreed to broaden appellate remedies under the new law by making orders passed by Adjudicating Officers appealable before the Securities Appellate Tribunal. It has further agreed to prescribe an outer limit for condonation of delay in filing appeals before SAT.

In another investor-protection measure, the Ministry has agreed to provide depositories with enabling powers to rectify records in cases involving fraud, forgery, coercion, or technical glitches.

On the issue of supersession of governing boards of Market Infrastructure Institutions (MIIs) and Self-Regulatory Organisations (SROs), the government clarified that the power would vest with the central government, though it would be exercised on Sebi's recommendation.

The Finance Ministry said the provision is based on powers already available under the section 11 of the Securities Contracts (Regulation) Act and has been extended to all MIIs under the proposed Code.