The Securities Markets Code (SMC) Bill draws a clear line on Securities and Exchange Board of India (SEBI) enforcement reach by imposing an eight-year statutory limit on inspections and investigations, a move aimed at preventing prolonged regulatory overhang on market participants.
However, this eight-year limitation will not apply to cases that have a systemic impact on the securities market.
Apart from setting a time bar, the Bill also introduced a time-bound enforcement framework. It mandates SEBI to complete investigations within 180 days, while simultaneously strengthening investor protection through the introduction of an ombudsperson-led grievance redressal mechanism.
The Bill, which was introduced in the Lok Sabha last week, requires SEBI to set aside 25% of its annual surplus in a Reserve Fund for expenses, with the remaining surplus transferred to the Consolidated Fund of India.
According to a person familiar with the matter, the eight-year limit would bring legal certainty and finality to past transactions, ensuring that entities are not “haunted indefinitely” by old cases.
“The provision is aimed at providing greater legal certainty to market participants, primarily in light of instances where regulatory matters have remained unresolved for years, creating prolonged uncertainty for entities,” the person added.
At the same time, changes related to time-bound completion of investigation and ombudsman concept are expected to place additional manpower demands on the regulator. SEBI will need to undertake capacity building and deploy adequately trained resources to implement the expanded framework effectively, the person said.
The Bill, which has been referred to a Standing Committee for further consultation, seeks to consolidate, rationalise and replace three existing securities laws — the Securities Contracts (Regulation) Act, 1956; the SEBI Act, 1992; and the Depositories Act, 1996.
Under the Bill, SEBI has been prohibited from directing an inspection or investigation into any matter if the underlying cause of action occurred more than eight years before the date of that direction.
As part of the time-bound approach, the Bill requires investigations to be completed within 180 days. In case of delays, SEBI is required to record the reasons in writing and seek an extension from a whole-time member. It also limits the validity of interim orders to 180 days, although such orders may be extended for up to two years if adjudication, inspection or investigation remains pending.
The Bill empowers the SEBI to designate one or more of its officers as ombudspersons. This expanded dispute-resolution role is expected to require additional staffing to handle the anticipated increase in investor complaints.
According to the Bill, the primary responsibility of the ombudsperson will be to receive, examine and redress grievances filed by investors. Currently, such complaints are handled through SEBI’s Complaints Redress System (SCORES) and the Online Dispute Resolution (ODR) platform.
The Bill lays out a clear escalation framework under which investors must first seek resolution through the internal grievance redressal mechanism of the concerned service provider or issuer within 180 days of filing a complaint. If the grievance remains unresolved after this period, the investor may approach the ombudsperson within the following 30 days.
However, the person familiar with the development has flagged that a large number of cases currently pending at the SCORES and ODR levels could eventually be escalated to the ombudsperson. Further, if orders passed by the ombudsperson are appealable before the Securities Appellate Tribunal (SAT), it could significantly increase the burden on the tribunal.
Against this backdrop, he stressed the need for clarity on whether the ombudsperson should serve as the final authority for SCORES-related complaints.
Published – December 21, 2025 11:26 am IST
