Parliamentary Panel Seeks Clear SEBI-RBI Jurisdiction Under Proposed Securities Markets Code

New Delhi, Jul 24 (KNN) The Parliamentary Standing Committee on Finance has recommended a clearer division of regulatory responsibilities between the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI), stating that the proposed Securities Markets Code, 2025 should explicitly define oversight roles to avoid overlap and uncertainty.

In its report tabled in Parliament on Thursday, the committee noted that India’s financial system includes entities engaged in activities regulated by multiple authorities. It recommended that regulatory jurisdiction be determined by the nature of the activity rather than the identity of the entity, ANI reported.

“The Committee further recommend that the revised provisions clearly delineate the respective regulatory jurisdictions of SEBI and the RBI so as to avoid overlap, eliminate potential regulatory gaps and provide greater certainty to market participants,” the report added.

The panel said entities could legitimately remain under SEBI’s jurisdiction for securities market activities while also being regulated by the RBI for functions falling within the central bank’s statutory mandate.

Need for Clear Legal Definitions

To ensure clarity, the committee proposed amendments to key definitions in the draft law, specifying that exclusions should apply only to activities regulated by the RBI and not to entities solely because they are supervised by it.

It emphasised that such an approach would reduce regulatory gaps, eliminate overlap and provide greater certainty to market participants.

Broader Recommendations on the Code

The committee, which examined the bill introduced in the Lok Sabha in December 2025, broadly supported the proposed legislation while suggesting several refinements.

It recommended that the Code’s preamble explicitly include objectives such as investor protection, market development, transparency and prevention of unfair practices.

The panel also proposed including Clearing Members and Foreign Portfolio Investors (FPIs) within the definition of ‘intermediary’ to avoid ambiguity.

Strengthening Enforcement and Oversight

The report called for clearer definitions of terms like ‘unlawful gain’, ‘wrongful gain’ and ‘loss averted’ to improve enforcement consistency.

While supporting broad regulatory and enforcement powers for SEBI, the committee stressed the need for safeguards, objective standards and transparency to prevent misuse.

Governance and Emerging Areas

Among other suggestions, the panel recommended a transparent and merit-based process for appointing SEBI’s leadership, wider public consultation before major regulations, and disclosure norms for prolonged investigations.

It also called for a comprehensive legal framework for virtual digital assets, with interim oversight through recognised self-regulatory organisations until formal legislation is introduced.

Overall Assessment

The committee endorsed the overall direction of the Securities Markets Code, 2025, stating that the recommended changes would enhance regulatory clarity, strengthen investor protection and improve the effectiveness of India’s securities market framework.

(KNN Bureau)