Parliamentary panel backs Sebi board expansion, longer cooling-off period for top brass

New Delhi: A parliamentary panel has proposed doubling the cooling-off period to two years before the chairperson and whole-time members of the Securities and Exchange Board of India can take up new jobs, to avoid any potential conflict of interest.

The Parliamentary Standing Committee on Finance, which submitted its report on the Securities Markets Code, 2025, Bill on Thursday, backed most of the proposals in the initial Bill, including raising the Sebi board strength to 15 from nine, bolstering investor protection mechanisms and the regulatory sandbox, and maintaining arm's length distance between the investigation and adjudication wings.

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The panel under senior BJP leader Bhartruhari Mahtab also proposed certain changes to the Bill's provisions. These include extending the deadline for wrapping up Sebi investigations from the proposed 180 days to one year to complete complex market-related investigations. It wants an outer limit of 120 days for the disposal of complaints by the ombudsperson and proposed to halve the time for approaching the ombudsperson to 90 days.

The panel pushed for fixing a 45-day deadline for condonation of delay in appeals before the Securities Appellate Tribunal (SAT). It suggested that appointments to the expanded Sebi board be routed through the Financial Sector Regulatory Appointments Search Committee to improve transparency and independence.

The Bill was presented by finance minister Nirmala Sitharaman in the Lok Sabha in December last year, with an aim of consolidating India's securities legislation into a single law.

The finance ministry will now present a fresh Bill, incorporating the panel's proposals that it accepts, for parliamentary clearance.

It called on the government to put in place a regulatory framework for virtual digital assets such as crypto and consider introducing an interim oversight mechanism until such a formal mechanism is introduced to end any regulatory vacuum.

Investor Charter

To bolster investor protection, the committee proposed making it compulsory for Sebi to frame an Investor Charter, defining investor rights and grievance redressal timelines.

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Key safeguards for retail investors during company delisting, the panel said, should be incorporated directly into the proposed law, instead of being left to subordinate regulations. It also pushed for making a clear distinction between civil defaults and criminal "market abuse" to ensure criminal liability is reserved for only serious and systemic misconduct.

The committee further recommended that monetary penalties be in sync with the severity of violations to ensure proportionality. The report cautioned against "excessive delegation" of substantive policy matters to subordinate legislation, saying issues such as criminal liability and essential rights should be specified in the primary law itself.