Securities Market Code may trigger early disclosures, clog SAT
Enactment of the Securities Market Code Bill, introduced in the Lok Sabha on the final day of the winter session and referred to the Standing Committee on Finance, could significantly alter market disclosures and add to the case load of the Securities Appellate Tribunal (SAT). The proposed law is likely to require listed companies to inform stock exchanges as soon as they receive a notice from the regulator.
A person in the know told businesslinethat there are concerns that the system of Ombudsman, introduced through the bill, could clog the Securities Appellate Tribunal (SAT), given that the tribunal would serve as the exclusive forum for appeals
Listed entities may effectively have to disclose regulatory actions twice, first, upon receipt of a notice, and again after adjudication, when a final decision is issued. “A listed entity is likely to intimate to inform the exchange twice about notices from the regulator. First, when it receives the notice and second, when the matter is adjudicated and the decision is to be given. This could lead to some unusual movement in the stock, possibly twice”, a person in the know said.
Last week, Finance Minister Nirmala Sitharaman introduced the Bill to consolidate and amend securities market laws into a single framework. The proposed legislation seeks to repeal the Securities and Exchange Board of India Act, 1992, the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. The Bill has since been referred to the Standing Committee of Parliament, which is expected to submit its report on the first day of the Budget session.
A key provision empowers SEBI to designate one or more of its officers as Ombudspersons to redress investor grievances in a time-bound manner. This mechanism will operate in addition to the existing SCORES and the Online Dispute Resolution (ODR) platform.
The Bill lays out a clear escalation framework under which investors must first approach the internal grievance redressal mechanism of the concerned intermediary or issuer within 180 days. If the grievance remains unresolved, the investor may move the Ombudsperson within the next 30 days. However, appeals against the Ombudsperson’s decisions cannot be filed in civil courts and must be taken to SAT.
“At present, SAT has only one bench with three adjudicating members. There is already a significant pendency of cases, and appeals against Ombudsperson rulings could materially increase the burden on the tribunal,” a person familiar with the matter said. The Bill provides that SAT benches will ordinarily sit in Mumbai, with additional locations to be notified by the Central government in consultation with the Presiding Officer.
According to the person, the Bill also draws clearer limits around SEBI’s enforcement powers by imposing an eight-year statutory cap on inspections and investigations, except in cases having a systemic impact on the securities market. It further mandates that investigations be completed within 180 days, introducing a time-bound enforcement framework alongside enhanced investor protection.
Separately, the Bill requires SEBI to set up a Reserve Fund, into which 25 per cent of its annual surplus will be transferred to meet its expenses, with the remaining surplus credited to the Consolidated Fund of India. The person added that a higher transfer, around 50 per cent, would have provided greater financial resilience to the regulator.
Published on December 21, 2025
