Economic Survey 2026: 'SMC can be model for wider regulatory reforms'

The SMC Bill has been referred to the Parliamentary Standing Committee on Finance, which is consulting industry participants and stakeholders, including Sebi and stock exchanges

The proposed Securities Market Code (SMC), which seeks to unify three laws governing India’s securities markets, could serve as a template for broader financial regulatory reforms, the Economic Survey 2025-26 said.

 

The Survey, tabled in Parliament on Thursday, noted that the principles underpinning the SMC —“transparency, consultation, proportionality, and accountability”— could guide the creation of new regulators and reform existing ones across the financial system.

 

The SMC Bill has been referred to the Parliamentary Standing Committee on Finance, which is consulting industry participants and stakeholders, including the Securities and Exchange Board of India (Sebi) and stock exchanges.

 

Once enacted, the Code will consolidate and replace the Securities Contracts (Regulation) Act, 1956, the Sebi Act, 1992, and the Depositories Act, 1996. Together, these laws govern Sebi’s powers and composition, norms for market intermediaries such as stock exchanges, and regulations related to securities trading.

 

 

“The ultimate test will be how deeply these governance standards embed themselves into everyday regulatory practice. And, whether they inspire similar transformation across India’s regulatory landscape,” the Survey said.

 

The Survey also highlighted that the Code brings market infrastructure institutions (MIIs), including stock exchanges and clearing corporations, onto a “clear statutory footing” for the first time. It formally recognises them as entities performing critical public functions.

 

With market activity expanding amid the emergence of new intermediaries and investment instruments, the Survey underscored the importance of robust regulatory governance to preserve market integrity. It described the SMC as a key step towards consolidating the legal framework and strengthening the foundations of securities market regulation.

 

Referring to Sebi’s practice of placing regulatory changes for public consultation, the Survey added that even rules framed by the government should undergo prior consultation.

 

Among other provisions, the Code caps the validity of interim orders at 180 days, extendable only through reasoned decisions by designated board members, with an overall maximum limit of two years.

 

This is intended to prevent interim orders from remaining in force for prolonged periods.

 

The Code also proposes expanding Sebi’s board to up to 15 members, including the chairperson, from the current nine. It also mandates disclosure of direct or indirect interests by board members during decision making.

 

“The broader composition ensures diversity of expertise across law, economics, and market operations, with at least three members required to have experience in securities markets. This blend of professionals is intended to strengthen deliberations and internal accountability,” the Survey added.

 

However, industry participants have raised concerns over potential constraints on Sebi’s funding under the new framework. They are also concerned about the expanded responsibilities placed on MIIs, which may require additional resources.