BILL NO. 200 OF 2025

A Bill to consolidate and amend the laws relating to the securities markets and for matters

connected therewith or incidental thereto.

Be it enacted by Parliament in the Seventy-sixth Year of the Republic of India as

follows:

CHAPTER I

PRELIMINARY

1. (1) This Code may be called the Securities Markets Code, 2025.

(2) It shall come into force on such date as the Central Government may, by notification

in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Code

and any reference in any such provision to the commencement of this Code shall be construed

as a reference to the coming into force of that provision.

Short title and

commencement.

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EXTRAORDINARY

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PART II — Section 2

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PUBLISHED BY AUTHORITY

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No. 23] NEW DELHI, THURSDAY, DECEMBER 18, 2025/AGRAHAYANA 27, 1947 (SAKA)

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Separate paging is given to this Part in order that it may be filed as a separate compilation.

LOK SABHA

————

The following Bill was introduced in Lok Sabha on 18th December, 2025:—

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REGISTERED NO. DL—(N)04/0007/2003—25

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Definitions.

2. (1) In this Code, unless the context otherwise requires,—

(a) “adjudicating officer” means a person designated as such under

sub-section (1) of section 17;

(b) “Bench” means a Bench of the Tribunal;

with a depository in respect of any securities or other regulated instrument and

the expression “beneficial ownership” shall be construed accordingly;

(d) “Board” means the Securities and Exchange Board of India referred

to in sub-section (1) of section 3;

(e) “bye-laws” means the bye-laws made by a market infrastructure

institution under section 39;

(f) “Chairperson” means the Chairperson of the Board appointed under

section 4;

(g) “clearing corporation” means a person undertaking the activity of

clearing and settlement of trades in securities, but does not include a system

provider defined in the Payment and Settlement Systems Act, 2007.

Explanation.––For the purposes of this clause,––

(i) “clearing” means the process of transmitting, reconciling and to

the extent applicable, confirming the payment obligations or transfers of

securities prior to settlement; and

(ii) “settlement” means the completion of delivery and payment of

funds or securities or underlying of a derivative, to the relevant parties

in a contract in order to settle their obligations or to provide a title to the

securities or underlying or both;

(h) “clearing member” means a person having clearing and settlement

rights as specified in the bye-laws of a clearing corporation;

(i) “commodity” means any kind of goods, including any activity,

service, right, interest or event relating to or associated with such goods, as

may be notified by the Central Government in consultation with the Board;

(j) “contract” means a contract for or relating to the purchase or sale of

securities;

(k) “depository” means a person engaged in the activity of providing

depository services, but shall not include a person providing depository

services in relation to a Government security, a Registry or a ledger account

maintained by the Reserve Bank or its agent in accordance with the provisions

of the Government Securities Act, 2006;

(l) “depository services” means any service relating to,—

(i) recording a transaction in securities or other regulated

instrument, including the allotment or transfer or transmission of

ownership of such securities or other regulated instrument in

dematerialised form in the record or register of a depository;

(ii) distribution of any monetary or securities-based benefits

associated with any securities or other regulated instrument;

(iii) facilitating electronic voting and exercising any interest and

rights associated with any securities or other regulated instrument; or

(iv) such other services as may be specified by regulations;

51 of 2007.

38 of 2006.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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2 of 1934.

38 of 2006.

(m) “derivative” includes,—

(i) a security derived from an underlying;

(ii) a contract for the actual or intended delivery of the underlying

on a future date and which is not a spot delivery contract;

(iii) a contract that derives its value from prices or indices of prices

or difference in prices of such underlying which may be settled with

physical delivery of the underlying or by paying the difference in cash

or equivalent;

(iv) a contract which provides for a right, with or without any

obligation for the actual delivery of the underlying on a future date;

(v) a contract or a swap agreement for exchange of cash flows or

underlying in future;

(vi) a contract which provides for exchange of one or more

payments in future based on the value of the underlying;

(vii) a derivative structured upon the same or a different kind of

derivative;

(viii) such other instruments as the Central Government may

notify; and

(ix) a combination of any contract or agreement specified in

sub-clauses (i) to (viii),

but shall not include derivative as defined in clause (a) of section 45U of the

Reserve Bank of India Act, 1934 and such other instruments as the Central

Government may notify in this regard;

(n) “Fund” means the Fund referred to in sub-section (1) of section 124;

(o) “goods” means any kind of movable property, other than actionable

claims, money and securities;

(p) “Government security” shall have the same meaning as assigned to

it in clause (f) of section 2 of the Government Securities Act, 2006;

(q) “intermediary” means,––

(i) an asset management company;

(ii) a banker to an issue;

(iii) a credit rating agency;

(iv) a custodian;

(v) a debenture trustee;

(vi) a depository participant;

(vii) an index provider in relation to indices traded in the securities

markets;

(viii) an investment adviser;

(ix) an investment manager;

(x) a Know Your Customer Registration Agency;

(xi) a merchant banker;

(xii) a portfolio manager;

(xiii) a pooled investment vehicle;

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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(xiv) a registrar to an issue;

(xv) a research analyst;

(xvi) a share transfer agent;

(xvii) a stock broker;

(xviii) a trading member;

(xix) a trustee of trust deed;

(xx) an underwriter;

(xxi) a vault manager; and

(xxii) such other persons associated with the securities markets, as

notified by the Board under sub-section (3) of section 34,

but shall not include a person carrying out the activities of the nature

mentioned in section 34 relating to instruments referred to in Chapter IIID of

the Reserve Bank of India Act, 1934;

(r) “investment scheme” means the scheme referred to in section 32;

(s) “Investor Protection and Education Fund” means the fund referred to

in section 125;

(t) “issuer” means any person who makes or proposes to make or has

made an issue of securities which are listed or to be listed;

(u) “listing” means the admission of securities for trading on a stock

exchange and the expression “listed” shall be construed accordingly;

(v) “market infrastructure institution” means a stock exchange, a

clearing corporation or a depository and includes such other class or classes

of market infrastructure institutions, as may be notified by the Central

Government, except those authorised or required to be authorised by other

regulatory bodies;

(w) “market participant” means a person or its agent participating in the

securities markets as an issuer or an investor.

Explanation.—For the purposes of this clause, an intermediary shall be

deemed to be a market participant, if it participates in the securities markets

as an investor or issuer;

(x) “member”, in relation to—

(i) a stock exchange or a clearing corporation, means a trading

member or a clearing member;

(ii) a depository, means a depository participant; and

(iii) any other market infrastructure institution notified under

clause (v), means a member of such market infrastructure institution;

(y) “notification” means a notification published in the Official Gazette

and the expressions “notify” or “notified” shall be construed accordingly;

(z) “other regulated instrument” means an instrument that is primarily

regulated by other regulatory authority;

(za) “other regulatory authority” means an authority or body constituted

or any department of the Central Government or the State Government

authorised, under any other law for the time being in force to regulate goods,

services, activities or transactions;

2 of 1934.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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21 of 2000.

54 of 2002.

(zb) “person” includes—

(i) an individual;

(ii) a Hindu undivided family;

(iii) a company;

(iv) a firm;

(v) an association of persons or a body of individuals, whether

incorporated or not;

(vi) a limited liability partnership;

(vii) a trust;

(viii) local authority; and

(ix) every artificial juristic person, not falling within any of the

preceding sub-clauses;

(zc) “pooled investment vehicle” means a fund referred to in

sub-section (1) of section 33;

(zd) “prescribed” means prescribed by rules made under this Code;

(ze) “record” includes the records maintained in the form of books

or in such other form as may be specified by regulations and

electronic record as defined in clause (t) of section 2 of the Information

Technology Act, 2000;

(zf) “Recovery Officer” means any officer of the Board authorised by

general or special order in writing to exercise the powers of a Recovery Officer

under this Code;

(zg) “regulations” means the regulations made by the Board;

(zh) “Schedule” means a Schedule appended to this Code;

(zi) “securities” include—

(i) shares, scrips, stocks, bonds, secured or unsecured debentures,

warrants, or debenture stock or other marketable securities of a like

nature in or of any incorporated company or a pooled investment vehicle

or other body corporate;

(ii) hybrid instruments;

(iii) convertible instruments;

(iv) derivatives;

(v) units or any other instruments issued in respect of any

investment scheme by a pooled investment vehicle to the investors in

such schemes;

(vi) security receipts managed and regulated in accordance with

the provisions of the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002;

(vii) a certificate or an instrument, by whatever name called, issued

to an investor by any issuer as a special purpose distinct entity which

possesses any debt or receivable including mortgage debt, assigned to

such entity, and acknowledging the beneficial interest of such investor

in such debt or receivable including mortgage debt, as the case may be;

(viii) global depository receipts and Indian depository receipts;

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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(ix) notes or papers issued for the purpose of raising of

capital, which are listed or proposed to be listed;

(x) Electronic Gold Receipts;

(xi) Government security managed and regulated under the

provisions of the Reserve Bank of India Act, 1934 and the

Government Securities Act, 2006;

(xii) zero coupon zero principal instruments;

(xiii) bullion spot delivery contract and bullion depository

receipt with underlying bullion in respect of issuance and trading

in an International Financial Services Centre under the provisions

of the International Financial Services Centres Authority

Act, 2019;

(xiv) onshore rupee bonds issued by multilateral institutions

such as the Asian Development Bank and the International Finance

Corporation;

(xv) other regulated instrument, to the extent it is permitted

for listing under section 119;

(xvi) such other instruments as may be notified by the Central

Government; and

(xvii) rights or interests in securities,

but shall not include any unit linked insurance policy or scrips or any such

instrument or unit, by whatever name called, which provides a combined benefit

risk on the life of the persons and investment by such persons and issued by an

insurer defined in clause (9) of section 2 of the Insurance Act, 1938;

(zj) “securities markets” means the markets related to securities;

(zk) “securities markets service provider” means an intermediary, a

market infrastructure institution or a self-regulatory organisation;

(zl) “self-regulatory organisation” means a person, formed and promoted

by a class of intermediaries or investors;

(zm) “Special Court” means the Special Court established or designated

by the Central Government under section 113;

(zn) “stock exchange” means a person engaged in assisting, regulating

or controlling the business of buying, selling or dealing in securities and

undertaking other related functions, but shall not include agencies permitted

to assist or facilitate buying, selling or dealing in instruments or securities

under Chapter IIID of the Reserve Bank of India Act, 1934;

(zo) “subsidiary instructions” mean the instructions made under

section 149 and include any circular, master circular, guideline and such other

instrument;

(zp) “trading member” means a person having trading rights in any stock

exchange and includes a stock broker;

(zq) “Tribunal” means the Securities Appellate Tribunal referred to in

section 79;

(zr) “underlying” in respect of a derivative, means a security or a

commodity or an actionable claim or money or currency or indices on any

instrument or prices or yields or volatility or liquidity or credit score or ratings

or events or activity or progress or a situation or financial measures or other

instruments from which such derivative derives its value;

2 of 1934.

38 of 2006.

50 of 2019.

4 of 1938.

2 of 1934.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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2 of 1934.

18 of 2013.

15 of 1992.

18 of 2013.

15 of 1992.

(zs) “unit” means an instrument by which contribution or subscription is

made by an investor to an investment scheme or to any person and represents

the beneficial interest or ownership of the unit holder in such investment

scheme or person, as the case may be;

(zt) “unlawful gain” means an unlawful gain including the profit made

and loss averted by a person.

(2) The words and expressions used herein and not defined, but defined in the

Reserve Bank of India Act, 1934 and the Companies Act, 2013 shall have the same

meanings assigned to them in those Acts.

CHAPTER II

ESTABLISHMENT, MANAGEMENT AND ADMINISTRATION OF BOARD

3. (1) The Securities and Exchange Board of India established and

incorporated under section 3 of the Securities and Exchange Board of India

Act, 1992 shall be deemed to have been established and incorporated under this

Code, having its head office in Mumbai.

(2) The Board may establish its offices at other places in India.

(3) On and from the date of commencement of this Code, all properties and

assets, movable or immovable, of or belonging to the Board and all rights and

liabilities of the Board, shall continue to vest in the Board.

4. (1) The Board shall consist of the following Members to be appointed by

the Central Government, namely:—

(a) Chairperson of the Board;

(b) two Members from amongst the officers of the Ministry of the

Central Government dealing with Finance and administration of the

Companies Act, 2013, ex officio;

ex officio; and

(d) eleven other Members of whom at least five shall be whole-time

Members.

(2) Without prejudice to anything contained in section 6, on the date of the

commencement of this Code, the Chairman and Members appointed under

section 4 of the Securities and Exchange Board of India Act, 1992, shall be deemed

to be the Chairperson and Members appointed under clauses (a) and (d) of

sub-section (1) for the remainder period.

(3) The Chairperson and Members referred to in clauses (a) and (d) of

sub-section (1) shall be appointed by the Central Government, in such manner as

may be prescribed and the members referred to in clauses (b) and (c) of that

sub-section shall be nominated by the Central Government and the Reserve Bank,

respectively.

(4) The Chairperson and Members referred to in clauses (a) and (d) of

sub-section (1) shall be persons of ability, integrity and standing in dealing with

problems relating to securities markets or have special knowledge or experience of

law, finance, economics, technology, commodity markets, accountancy,

administration or in any other discipline which in the opinion of the Central

Government is useful to the Board:

Provided that while appointing Members referred to in clause (d) of

sub-section (1), the Central Government shall endeavour to appoint at least three

persons with expertise in the securities markets.

Securities and

Exchange Board

of India.

Composition of

Board.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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Terms and

conditions of

service of

Chairperson and

Members of

Board.

Removal of

Members from

office.

Management of

Board.

5. (1) The Chairperson and every whole-time Member of the Board shall hold

office for a term not exceeding five years:

Provided that no person shall hold office as the Chairperson or a whole-time

Member on attaining the age of sixty-five years.

(2) Every other Member referred to in clause (d) of sub-section (1) of

section 4 shall hold office for a term not exceeding three years:

Provided that no person shall hold office as other Member on attaining the age

of seventy years.

(3) The other terms and conditions of service of the Chairperson and the

Members referred to in clauses (a) and (d) of sub-section (1) of section 4 shall be

such as may be prescribed.

(4) The term of office of ex officio Members shall continue as long as they

hold the office by virtue of which they are such Members.

(5) Notwithstanding anything contained in sub-section (1), or sub-section (2),

the Central Government shall have the right to terminate the services of the

Chairperson or a Member appointed under clauses (a) and (d) of sub-section (1) of

section 4, at any time before the expiry of the period specified under sub-section (1)

or sub-section (2), by giving notice of not less than three months in writing or three

months’ salary and allowances in lieu thereof, and the Chairperson or such Member,

as the case may be, shall have the right to relinquish his office, at any time before

the expiry of the period specified under sub-section (1) or sub-section (2), by giving

notice of not less than three months in writing to the Central Government.

(6) The Chairperson and the whole-time Members shall not accept any

employment under the Central Government or any State Government or any

appointment with a securities markets service provider or a market participant or

any other person associated with securities markets for a period of one year from

the date on which they cease to hold office, except with the prior approval of the

Central Government.

6. The Central Government shall remove a Member from the office, if such

Member—

(a) is, or at any time has been, adjudged as an insolvent;

(b) is of unsound mind and stands so declared by a competent court;

which in the opinion of the Central Government, involves moral turpitude;

(d) has, in the opinion of the Central Government, acquired any financial

or other interests that is likely to prejudice his functions; or

(e) has, in the opinion of the Central Government, so abused his position

as to render his continuation in the office detrimental to public interest:

Provided that no Member appointed under clauses (a) and (d) of sub-section (1)

of section 4 shall be removed under clauses (d) and (e) of this section unless such

Member has been given an opportunity of being heard in the matter.

7. (1) The general superintendence, directions and management of the affairs

and business of the Board shall vest in a Board of Members referred to in section 4

to exercise all powers and do all acts and things which may be exercised or done by

the Board.

(2) Save as otherwise provided by regulations, the Chairperson shall also have

powers of general superintendence and direction of the affairs of the Board and may

also exercise all powers and do all acts and things which may be exercised or done

by the Board, except the powers under sections 128 and 146.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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8. (1) The Members of the Board shall meet at such times and places, and shall

observe such rules of procedure in regard to the transaction of business at its

meetings, including quorum at such meetings and maintaining arrangements for

recording, safe-keeping and publications of the decisions, as may be specified by

regulations:

Provided that the Members of the Board may by circulation, take decisions in

such manner as may be specified by regulations.

(2) The Chairperson, or if he is unable to attend a meeting of the Board for

any reason, any other Member chosen by the Members present from amongst

themselves at the meeting, shall preside over the meeting.

(3) All questions which come up before any meeting of the Board shall be

decided by a majority of the Members present and voting, and in the event of

equality of votes, the Chairperson, or in his absence, the person presiding shall have

a second or casting vote.

(4) Any Member, who has such direct or indirect interest, including the interest

of any family member, as may be specified by regulations, in any matter coming up

for consideration at a meeting of the Board shall, as soon as possible after the said

interest has come to his knowledge, disclose the nature of his interest at such

meeting and such disclosure shall be recorded in the proceedings of the meeting of

the Board, and such Member shall not take any part in any deliberation or decision

of the Board with respect to that matter.

(5) The provisions of sub-sections (3) and (4) shall mutatis mutandis apply to

all decisions taken by way of circulation.

9. (1) The Board may appoint such other officers and employees as it considers

necessary for the efficient discharge of its functions under this Code.

(2) The qualifications, method of recruitment and terms and other conditions

of service of officers and employees of the Board appointed under sub-section (1)

shall be such as may be specified by regulations.

10. No act or proceeding of the Board shall be invalid merely by reason of,—

(a) any vacancy in, or any defect in the constitution of the Board;

(b) any defect in the appointment of a person acting as a Member of the

Board; or

of the case.

11. (1) Subject to the provisions of this Code, the Board shall protect the

interest of investors in securities and promote the development of, and regulate the

securities markets, by such measures as it may deem fit.

(2) Without prejudice to the generality of the foregoing provisions, the Board

shall exercise the powers and perform the following functions, namely:––

(a) register and regulate the market infrastructure institution;

(b) register and regulate the intermediaries;

(d) regulate the business in securities markets;

(e) regulate the issue, listing, delisting, transfer of securities, dealings in

securities and other related matters by market participant, subject to the

provisions of Chapter XV;

Meetings of

Board.

Officers and

employees of

Board.

Vacancies, etc.,

not to invalidate

proceedings of

Board.

Powers and

functions of

Board.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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(f) regulate or prohibit the public issue of any prospectus, offer document

or advertisement soliciting money by way of issue of securities;

(g) regulate or prohibit the solicitation of money from investors in

respect of any investment scheme;

(h) regulate substantial acquisition of shares and take-over of companies;

(i) regulate the working of any class or classes of market participants,

either directly or indirectly through a market infrastructure institution or a

self-regulatory organisation;

(j) regulate the qualifications and certification of the securities markets

service providers;

(k) protect the interest of investors, promote investor education and

awareness and ensure effective and time-bound redressal of investor

grievances;

(l) prohibit fraudulent and unfair practices relating to the securities

markets and market abuse;

(m) promote training of intermediaries and market participants;

(n) promote transparency and best practices in its governance;

(o) ensure fair and timely disclosure of information by a securities

markets service provider;

(p) ensure adequate training and capacity-building of its officers and

employees for facilitating efficient discharge of functions;

(q) lay down principles for implementation of this Code;

(r) call for information from a securities markets service provider or a

market participant or any other person associated with securities markets for

the implementation of this Code;

(s) call for information and records from any person including any bank

or a financial institution or any other authority or board or corporation

established or constituted by or under any Central Act or State Act, which may

be relevant to any inspection, investigation or adjudication in respect of any

transaction in securities;

(t) call for information from or furnish information to, other authorities,

whether in India or outside India, in the matters relating to prevention or

detection of contraventions in respect of securities laws, subject to the

provisions of other laws for the time being in force:

Provided that the Board, for the purposes of furnishing any information

to any authority outside India, may enter into an arrangement or agreement or

understanding with such authority with the prior approval of the Central

Government;

(u) undertake inspection, investigation and adjudication;

(v) share any information or other documents obtained during

inspection, investigation or adjudication, as the case may be, regarding the

contravention of any other law for the time being in force with the authorities

concerned, if such information or documents are relevant or useful to such

authority;

(w) levy fees or other charges for carrying out the purposes of this Code

which shall be reviewed periodically;

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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5 of 1908.

(x) conduct periodic research, regulatory impact assessment studies and

audit of functioning and performance of securities markets including securities

markets service provider, and publish such information and data on its

website;

(y) maintain its website or any other universally accessible database of

electronic information on securities markets, and publish on such website or

database all regulations, subsidiary instructions, orders of the adjudicating

officer and the Ombudsperson and any other information as it deems fit; and

(z) perform such other functions as may be prescribed.

(3) The Board shall review its performance and functioning including

proportionality and effectiveness of the regulations made in this behalf.

(4) Notwithstanding anything contained in any other law for the time being in

force, while exercising the powers under clause (r) or clause (s) or clause (u) of

sub-section (2), the Board shall have the same powers as are vested in a civil court

under the Code of Civil Procedure, 1908 while trying a suit, in respect of the

following matters, namely:—

(a) the discovery and production of books of account and other

documents, at such place and time as may be specified by the Board;

(b) summoning and enforcing the attendance of persons and examining

them on oath;

markets service provider or an issuer, at any place; or

(d) issuing commissions for the examination of witnesses or documents.

CHAPTER III

INSPECTION, INVESTIGATION, ADJUDICATION AND INTERIM ORDER

12. The Board may inspect a securities markets service provider, a market

participant or any other person associated with securities markets in such manner as

may be specified by regulations:

Provided that the Board may order inspection of any book or register or other

document or record of any issuer, not being an intermediary, where the Board has

reasonable grounds to believe that such issuer has been indulging in fraudulent or

unfair practices or market abuse referred to in section 92 or section 93, as the case

may be.

13. (1) If the Board, on receipt of any information or otherwise, has reasonable

grounds to believe that—

(a) transactions in securities are being undertaken in a manner

detrimental to the investors or the securities markets;

(b) any securities markets service provider, a market participant or any

other person associated with the securities markets has contravened any of the

provisions of this Code or the rules or regulations made thereunder, or any

order issued by the Board; or

it may, by an order in writing, direct one or more persons from amongst its

Chairperson, whole-time Members or officers, to act as the Investigating Officer to

investigate into such transactions or contraventions or the affairs of such securities

markets service provider, a market participant or any other person associated with

the securities markets and submit a report to the Board:

Inspection.

Investigation.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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General powers

and obligations

of Investigating

Officer.

Provided that the Board may seek assistance of a securities markets service

provider or an expert to assist the Investigating Officer under this Chapter, in such

manner as may be specified by regulations.

(2) The order referred to in sub-section (1) shall be in such form as may be

specified by regulations and the investigation shall be completed within a period of

one hundred and eighty days:

Provided that where the investigation report is not submitted within the

aforesaid period, the Investigating Officer shall provide the status of the

investigation to the Board and record the reasons for the delay and request the

whole-time Member concerned for extension of time:

Provided further that on receipt of a request for extension of time, the

whole-time Member, if necessary, grant such extension, with such conditions, if

any, as he may deem fit, or reject the request.

(3) The Investigating Officer shall, if quantifiable, quantify the unlawful gains

made or likely to be made or the loss caused, or likely to be caused to an investor or

group of investors as a result of any default or contravention in accordance with

such criteria and manner as may be specified by regulations.

(4) If the Board, upon consideration of the investigation report is of the opinion

that further investigation is called for, it may, by an order direct the Investigating

Officer to make further investigation and submit a supplementary report within such

period as specified therein.

(5) The procedure for conducting investigation under this Chapter shall be

such as may be specified by regulations.

14. (1) Notwithstanding anything contained in any other law for the time being

in force, where an investigation has been directed under section 13,—

(a) every key managerial personnel, director, manager, secretary or other

officer or employee of a securities markets service provider or a market

participant or a person being a body corporate;

(b) every trustee or manager or employee of a securities markets service

provider or a market participant or a person being a trust;

other officer of the firm or society of a securities markets service provider or

a market participant or a person being a firm or society; and

(d) every other person or body of persons who has or had dealings in the

course of business with any of the persons mentioned in clauses (a), (b) and

(c), whether directly or indirectly,

shall—

(i) preserve and produce before the Investigating Officer or any person

authorised by him in this behalf, all such books of account, registers, records,

information and other documents in his custody or power relating to or having

a bearing on the subject-matter of such investigation, as the case may be;

(ii) furnish any such statement or undertaking or certification relating

thereto, as may be required, within such period as specified by the

Investigating Officer or any person authorised by him in this behalf;

(iii) provide reasonable assistance to the Investigating Officer or any

person authorised by him in this behalf, relating to the investigation; and

(iv) appear personally and take oath before the Investigating Officer

when required to do so and answer any question put to him during such

appearance in relation to the affairs of his business.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

5 of 1908.

(2) The Investigating Officer shall record the examination referred to in

sub-section (1) in writing, which shall be read over and explained to, or by, and

signed by the person examined, which may thereafter be used in evidence.

(3) The Investigating Officer may keep in his custody any books, registers,

other documents and record produced under sub-section (1) for a period of six

months and shall thereafter return the same to the person concerned.

(4) The Investigating Officer, if deems necessary, may again call for any book,

(5) If the person who produced the books, registers, other documents and

records under sub-section (1), requires certified copies of the same, the Investigating

Officer shall provide such copies.

(6) The Investigating Officer shall, before exercising his powers under this

section against any person, serve a notice to him, in such form and manner as may

be specified by regulations:

Provided that where the Investigating Officer is satisfied that the issuance of

a notice shall cause undue delay in investigation or there is an apprehension that

records, books of account, registers, information and other documents referred to in

sub-section (1) may be destroyed, mutilated, concealed, altered, falsified or

secreted, after the notice is served, he may, for reasons to be recorded in writing,

dispense with issuance of such notice.

(7) Notwithstanding anything contained in any other law for the time being in

force, the Investigating Officer shall have the same powers as are vested in a civil

court under the Code of Civil Procedure, 1908 while trying a suit, in respect of the

following matters, namely:—

(a) the discovery and production of books of account and other

documents, at such place and such time as may be specified by the Board;

(b) summoning and enforcing the attendance of persons and examining

them on oath;

markets service provider or an issuer, at any place; and

(d) issuing commissions for the examination of witnesses or documents.

15. (1) Where in the course of an investigation, the Investigating Officer has

reasonable grounds to believe that the books, registers, other documents and records

of, or relating to, any person, may be destroyed, mutilated, altered, concealed,

falsified or secreted, the Investigating Officer may make an application to the

Special Court for seizure of such books, registers, other documents and record.

(2) After considering the application and hearing the Investigating Officer, if

necessary, the Special Court may, by order, authorise the Investigating Officer or

any person authorised by him during the investigation—

(a) to enter, with such assistance, as may be required, the place or places

where such books, registers, other documents and records are kept;

(b) to search that place or those places in the manner specified in the

order; and

necessary for the purposes of the investigation:

Provided that the Special Court shall not authorise seizure of books, registers,

other documents and record, of any issuer, not being an intermediary, unless such

issuer indulges in market abuse referred to in section 93.

Search and

seizure.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Bar on initiation

of inspection or

investigation.

Power of Board

to designate

adjudicating

officer.

(3) The Investigating Officer may requisition the services of any police officer

or any officer of the Central Government, or of both, to assist him for all or any of

the purposes specified in sub-section (2) and it shall be the duty of every such officer

to comply with such requisition.

(4) The Investigating Officer shall keep in his custody the books, registers,

other documents and record seized under this section for such period as he considers

necessary, not later than the conclusion of the investigation and thereafter shall

return the same to the person from whose custody or power those were seized under

sub-section (2) and inform the Special Court of such return:

Provided that the Investigating Officer may, before returning such books,

registers, other documents and record as aforesaid, place identification marks on

them or any part thereof.

(5) Save as otherwise provided in this section, every search or seizure made

under this section shall be carried out in accordance with the provisions of the

Bharatiya Nagarik Suraksha Sanhita, 2023.

16. (1) The Board shall not direct,—

(a) an inspection under section 12; or

(b) an investigation under section 13,

for default or contravention of any provisions of this Code or rules or regulations

made thereunder, after the expiry of a period of eight years from the date of default

or contravention:

Provided that the Board may direct inspection or investigation after the period

specified above, in the event of a matter being referred to it by an investigating

agency or if in the opinion of the Board, the default or contravention had or may

have a systemic impact on the securities markets.

(2) In case of a continuing default or contravention, a fresh period under

sub-section (1) shall begin to run at every moment of the time during which the

default or contravention continues.

(3) If more than one default or contravention is committed in a series of

connected acts forming the same transaction and such default or contravention are

committed at different times, the period under sub-section (1) for these defaults or

contraventions shall be deemed to have begun from the date of the last default or

contravention.

17. (1) Subject to sub-section (2), where the Board, after consideration of—

(a) the findings of the inspection made under section 12;

(b) the investigation report, together with any supplementary report,

received under section 13,

and any other information, if any, is of the opinion that there are sufficient grounds

to pass an order under section 20, it may designate one or more persons from

amongst its Chairperson, whole-time Members or any other officer not below such

rank of a Division Chief, as may be specified by regulations, to act as an adjudicating

officer for the purposes of this Chapter.

(2) No person shall be designated as an adjudicating officer, if he has––

(a) authorised the initiation of the inspection or investigation, which is

the basis for issuance of a show cause notice to a person in that matter; or

(b) been involved in the conduct of the inspection or investigation, which

is the basis for issuance of a show cause notice to a person or assisted in the

conduct of such processes in that matter; or

46 of 2023.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

5 of 1908.

matter and decided to appoint the adjudicating officer for adjudication under

this Chapter; or

(d) considered any settlement application filed by a person to whom a

show cause notice is to be issued in that matter; or

(e) passed an interim order under sub-section (2) of section 27.

(3) Where a person is designated as an adjudicating officer under

sub-section (1), he shall not––

(a) conduct the inspection or investigation in respect of the person to

whom the adjudicating officer has issued a show cause notice until the final

disposal of the matter relating to such show cause notice; and

(b) consider or take a decision on any settlement application filed by a

person to whom the adjudicating officer has issued a show cause notice.

(4) The adjudication proceedings shall be conducted in such manner as may

be specified by regulations.

18. (1) For the purposes of adjudication under this Code, the adjudicating

officer shall issue a show cause notice to the person concerned specifying the nature

of the default or contravention alleged to have been committed, the period for reply

to such notice, and enclose such relevant documents and particulars as may be

specified by regulations.

(2) The person to whom a show cause notice has been issued under

sub-section (1), shall submit the reply in writing along with evidence in support, if

any, within such period as specified therein.

(3) If the noticee fails to show cause within the period specified therein, the

adjudicating officer shall proceed to adjudicate the matter ex parte.

(4) Notwithstanding anything contained in any other law for the time being in

force, the adjudicating officer shall have the same powers as are vested in a civil

court under the Code of Civil Procedure, 1908 while trying a suit, in respect of the

following matters, namely:—

(a) the discovery and production of books of account and other

documents, at such place and time as may be specified by adjudicating officer;

(b) summoning and enforcing the attendance of persons and examining

them on oath;

markets service provider or an issuer, at any place; and

(d) issuing commissions for the examination of witnesses or documents.

19. The adjudicating officer shall have due regard to the following factors

before making any order under section 20, namely:—

(a) the order shall be proportionate to the default or contravention

committed by the noticee and act as a deterrent against the commission of such

default or contravention by the noticee or any other person in future;

(b) the nature, seriousness and impact of the default or contravention,

including,—

(i) whether the contravention was deliberate, reckless or negligent;

(ii) duration and frequency or repetitive nature of the default or

contravention;

(iii) unlawful gains made or likely to be made as a result of the

default or contravention;

Power of

adjudicating

officer.

Factors for

adjudication.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Final order by

adjudicating

officer.

Board to call for

records.

Power of

adjudicating

officer or Board

to rectify order.

(iv) loss caused or likely to be caused to an investor or group of

investors as a result of the default or contravention; or

(v) the impact of the default or contravention on the integrity of the

securities markets;

(i) bringing to the notice of the Board, the default or contravention

within a reasonable time;

(ii) remedial or preventive measures taken in respect of the default

or contravention;

(iii) extent of cooperation with the Board during the inspection,

investigation or adjudication;

(d) past conduct of the noticee or whether the noticee fulfils the

fit-and-proper criteria to render its services in the securities markets;

(e) action taken in previous similar cases by any adjudicating officer; and

(f) any other factors which the adjudicating officer may consider necessary.

20. The adjudicating officer shall, on receipt of the reply to the show cause

notice and after considering all the relevant materials on record, by an order, either

dismiss the show cause notice if no cause exists, or if sufficient cause exists take

one or more of the following actions, namely:—

(a) suspend or cancel the certificate of registration granted under this Code;

(b) issue appropriate directions or warnings under section 23;

(d) direct disgorgement under section 25; or

(e) impose penalty under sections 97 to 109:

Provided that no order shall be passed unless the person concerned has been

given an opportunity of being heard in the matter.

21. (1) The Board may, call for and examine the record of any proceedings

under this section within a period of thirty days from the date of the order passed by

the adjudicating officer under section 20, and if it considers that such order is not in

the interest of the securities markets, it may, after making or causing to be made

such inquiry as it deems necessary, pass an order enhancing the quantum of penalty

or the severity of any direction, if the circumstances of the case so justify:

Provided that no such order shall be passed unless the person concerned has

been given an opportunity of being heard in the matter:

Provided further that the Board shall not call for the records and pass an order,

where an appeal has been filed and disposed of under section 85.

(2) The Board shall pass an order within a period of four months from the date

of calling for the record of any proceedings under this section.

(3) The provisions of sub-sections (2) and (3) of section 17 shall, mutatis

mutandis, apply to sub-sections (1) and (2).

22. The adjudicating officer or the Board may, on his or its own motion or on

a request made by any of the aggrieved party, modify an order passed under

section 20 or section 21, as the case may be, to rectify any error apparent on the face

of the record, within a period of thirty days from the date of such order:

Provided that while rectifying the error, the adjudicating officer or the Board

shall not modify substantive part of the order.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

23. (1) Where the adjudicating officer is satisfied that it is necessary—

(a) in the interest of investors, or orderly development of securities markets;

(b) to prevent the affairs of any securities markets service provider or a

market participant, being conducted in a manner detrimental to the interests of

investors or securities markets; or

he may issue such directions or warnings, to all or any such securities markets

service provider or a market participant or any other person associated with

securities markets, as deemed fit.

(2) The directions or warnings referred to in sub-section (1), may include one

or more of the following actions, namely:—

(a) suspension of trading of any securities on a stock exchange, subject

to the orderly close out;

(b) suspension of clearing of any contracts by any clearing corporation;

stock exchange in full or part, and reversing any payments made in respect thereof;

(d) restraining persons from accessing the securities markets and

prohibiting any person associated with securities markets to buy, sell or deal

in securities for such period as may be specified in the order;

(e) suspending any office-bearer of any market infrastructure institution

or self-regulatory organisation or securities markets service provider from

holding such position for such period and in such entities or class of entities

as may be specified in the order;

(f) directing a person holding securities or rights over any securities or

voting or management rights in an issuer, to divest its holdings or rights, in

such manner as may be specified in the order;

(g)

directing any securities markets service provider, market

infrastructure institution or self-regulatory organisation, to divest its securities

or rights, in other entities, held in contravention of the provisions of this Code

or the rules or regulations made thereunder and providing the manner of such

disinvestment as may be specified in the order;

(h) directing the transfer of any proceeds or any securities to a designated

account;

(i) impounding and retaining the proceeds or securities in respect of any

transaction under adjudication;

(j) pending adjudication, attach bank accounts or other property of any

person involved in contravention of any of the provisions of this Code or the

rules or regulations made thereunder, for a period not exceeding ninety days:

Provided that the Board shall within the said period of attachment, obtain

confirmation of the same from the Special Court having jurisdiction and, on

such confirmation, the attachment shall continue and upon conclusion of the

said proceedings, the provisions of section 136 shall apply:

Provided further that the property, bank account or accounts or any

transaction entered therein, in so far as it relates to the proceeds actually

involved in the contravention of any of the provisions of this Code or the rules

or regulations made thereunder shall be allowed to be attached; or

(k) pending adjudication, direct any person not to dispose of or alienate

an asset forming part of any transaction which is under adjudication:

Power of

adjudicating

officer to issue

directions or

warnings.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Person to cease

and desist from

committing

contravention.

Power of

disgorgement

and restitution.

Settlement of

administrative

and civil

proceedings.

Provided that the adjudicating officer may, take any of the actions

specified in clause (i) or clause (j) or clause (k), in respect of any issuer, not

being an intermediary, where he has reasonable grounds to believe that such

issuer has indulged in fraudulent and unfair practices or market abuse

referred to in section 92 or section 93, as the case may be.

24. If the adjudicating officer, pending adjudication or on completion thereof,

finds that any person has contravened, or is likely to contravene, any provisions of this

Code or the rules or regulations made thereunder, he may pass an order requiring such

person to cease and desist from committing or causing such contravention:

Provided that the adjudicating officer shall not pass such order in respect of

any issuer, not being an intermediary, unless the adjudicating officer has

reasonable grounds to believe that such issuer has indulged in market abuse

referred to in section 93.

25. (1) The adjudicating officer may direct any person who has made an

unlawful gain by indulging in any transaction or activity in default or contravention

of any of the provisions of this Code or the rules or regulations made thereunder, to

disgorge an amount equivalent to the unlawful gain made by such contravention.

(2) The Board may provide restitution to the persons who have been affected

by the default or contravention, from the amount so disgorged under

sub-section (1), following such procedure and such criteria for distribution of the

disgorged amount and the order of priority as may be specified by regulations, if

the following conditions are satisfied,—

(a) the loss suffered is directly attributable to the default or contravention;

(b) the person who suffered the loss is identifiable;

placed persons; and

(d) such other conditions as may be specified by regulations.

26. (1) Notwithstanding anything contained in any other law for the time

being in force, any person,—

(a) who seeks to voluntarily disclose any true and vital information

which may amount to a contravention of the provisions of this Code and any

rules or regulations made thereunder; or

(b) against whom any proceedings may be initiated or have been

initiated and are pending before the Board or any court or Tribunal,

may file an application in writing to the Board, proposing for settlement of the

proceedings initiated or to be initiated, subject to such conditions and payment of

such fee, within such time and in such manner, as may be specified by regulations.

(2) The Board may constitute a committee with such members on such terms

and conditions for advising it for the settlement of proceedings in such manner as

may be specified by regulations.

(3) The Board may, after taking into consideration the nature, gravity and

impact of default or contravention, the advice of the committee constituted for the

purpose and such other factors as may be specified by regulations, by an order,

consider the proposal for settlement, on payment of such amount by the applicant

and on such terms and conditions as may be determined by the Board:

Provided that where the proposal for settlement is considered by the Board

during the pendency of the proceedings before a court or Tribunal, it shall place

such proposal before such court or Tribunal for appropriate order.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

(4) Where an application under sub-section (1) is filed after the designation

of the adjudicating officer, the adjudication proceedings shall continue, but no

order under section 20 shall be passed till the settlement of such application is

decided by the Board, and if the proposal for settlement is,—

(a) agreed by the Board, the adjudicating officer shall, by an order,

dismiss the show cause notice in respect of the applicant; or

(b) rejected by the Board, the adjudicating officer shall proceed to

complete the adjudication and shall pass an order under section 20.

(5) If the applicant fails to comply with terms and conditions referred to in

sub-section (3), then the proceedings shall be initiated or continued before the

adjudicating officer or the Tribunal or the court, as the case may be.

(6) The settlement proceedings shall be conducted in such manner as may be

specified by regulations.

(7) No appeal shall lie to the Tribunal under section 85 against any order

passed under this section.

(8) All settlement amounts, excluding the disgorgement amount and legal

costs, realised under this Code shall be credited to the Consolidated Fund of India

in such manner as may be prescribed.

27. (1) The Board may, for the purpose of passing an interim order authorise

the Chairperson, a whole-time Member or an officer not below the rank of

Division Chief, if,—

(a) pending inspection under section 12 or investigation under section 13;

(b) upon completion of inspection under section 12 or investigation under

section 13 but the adjudicating officer has not been designated under section 17,

it has reasonable grounds to believe that the person being inspected or investigated

is taking or is about to take any action which—

(i) contravenes the provisions of this Code or the rules or regulations made

thereunder;

(ii) may prevent the person from conducting inspection or investigation; or

(iii) may adversely affect the conduct of adjudication:

Provided that no person shall be authorised to pass an interim order in any

matter, if such person is conducting or has conducted inspection or investigation in

such matter.

(2) The person authorised under sub-section (1) or where the adjudication

proceeding is pending, the adjudicating officer, as the case may be, may, pass an

interim order, for reasons to be recorded in writing, if he has reasonable grounds to

believe that if no such order is passed,—

(i) the interests of investors or securities markets shall be adversely affected;

(ii) the person conducting inspection or the Investigating Officer shall not

be able to carry out pending inspection or investigation, as the case may be; or

(iii) the final order to be passed by the adjudicating officer under

section 20 cannot be enforced due to change of circumstances:

Provided that no order shall be passed unless an opportunity of being heard is

given to the person concerned:

Power of Board

and adjudicating

officer to pass

interim order.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Registration of

intermediaries,

etc.

Surrender,

suspension and

cancellation of

certificate of

registration.

Provided further that in cases of urgency, where the object of granting the

interim order is likely to be defeated by delay, the requirement of providing an

opportunity of being heard before passing an order may be dispensed with for

reasons to be recorded in writing, and the concerned person shall be given an

opportunity of being heard as soon as practicable thereafter.

(3) The interim order shall be valid for a period not exceeding one hundred

and eighty days.

(4) On the expiry of the period specified in sub-section (3), if the inspection

or investigation has not been completed or the inspection or investigation is

completed but an adjudicating officer has not been designated or the adjudication

is pending, as the case may be, and an extension of the interim order is sought, the

Board may designate not more than three persons from amongst its Chairperson

and whole-time Members, who, if satisfied, may extend such interim order in

writing for a further period not exceeding two years.

(5) The provisions of sections 23 and 24 shall, mutatis mutandis apply to all

the proceedings for passing an interim order.

CHAPTER IV

REGISTRATION OF INTERMEDIARIES AND OTHER PERSONS, INVESTMENT SCHEMES AND

RELATED MATTERS

28. (1) No person shall carry on its business as an intermediary or a

self-regulatory organisation or sponsor or cause to be sponsored or carry on or

cause to be carried on any pooled investment vehicle or any investment scheme

unless it is registered with the Board under this Code.

(2) Any person desirous of being registered under this Chapter, shall make an

application to the Board in such form and manner, subject to such criteria and

accompanied by such fee, as may be specified by regulations:

Provided that if the application is found to be defective, the Board may return

the application for rectification, if rectifiable, within such period as may be

specified by regulations.

(3) On receipt of an application under sub-section (2), the Board, on being

satisfied that the application fulfils the requirements referred to in sub-section (2),

may grant a certificate of registration to the applicant for such period, in such form

and manner, subject to such terms and conditions, and within such period as may

be specified by regulations:

Provided that the applicant who has been granted a certificate of registration

under this sub-section, shall comply with such additional conditions as may be

specified by regulations from time to time.

(4) No application for the grant of registration under this section shall be

rejected, without giving an opportunity of being heard to the applicant and the

reasons for such refusal shall be communicated to the applicant in writing.

29. (1) Any person who has been issued a certificate of registration under

section 28 may apply to the Board for surrender of such certificate in such form and

manner, subject to such conditions as may be specified by regulations, and the Board

may,—

(a) by an order revoke the registration, if it is satisfied that such

certificate may be surrendered; and

(b) impose any conditions to be fulfilled by the applicant before the

certificate of registration is surrendered:

Provided that no conditions which are prejudicial to the applicant shall be

imposed before giving him an opportunity of being heard.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

(2) Without prejudice to sub-section (1), the adjudicating officer may

suspend or cancel the certificate of registration under clause (a) of section 20, for

such period as may be specified by regulations, on any of the following grounds,

namely:—

(a) the person has not fulfilled the conditions of registration or has

failed to comply with any specified criteria for obtaining the certificate of

registration;

(b) the person has obtained the certificate of registration by making a

false statement or misrepresentation or by any other unlawful means;

or regulations or bye-laws made thereunder; or

(d) any other grounds as may be specified by regulations:

Provided that no order shall be made under this section unless the applicant

has been given an opportunity of being heard.

30. (1) The Board may register such class or classes of investors as may be

specified by regulations and no such person shall carry on its investment activity or

business without such registration.

(2) The provisions of sections 28 and 29 shall, mutatis mutandis, apply in

relation to registration of the persons referred to in sub-section (1).

31. (1) The Board may, delegate the power of registration of any class or

classes of intermediaries or investors to a market infrastructure institution or a

self-regulatory organisation, by an order in writing, subject to such conditions, if

any, specified therein.

(2) The provisions of sections 28 and 29 shall, mutatis mutandis, apply for

such registration under sub-section (1).

(3) The market infrastructure institution or a self-regulatory organisation to

whom the power has been delegated under sub-section (1), shall,—

(a) maintain standards of fairness and confidentiality while exercising

such delegated powers; and

(b) not refuse to grant a certificate of registration to a person, except by

an order, after giving him an opportunity of being heard.

(4) Where the market infrastructure institution or the self-regulatory

organisation refuses to grant a certificate of registration to any person, such person

may apprise the Board of such refusal in writing, and the Board may issue

appropriate directions in the matter.

32. (1) Any scheme or arrangement, the purpose or effect of which is to

enable persons taking part in the same, whether by becoming owners of any asset

or any part of it or otherwise, to participate in or receive beneficial interest in the

form of profits or income or dividend or any produce or benefit arising from the

acquisition, holding, management or disposal of any asset or sums paid out of such

profits or income or dividend or produce or benefit, and where,—

(a) the persons participating in such scheme or arrangement do not

have day-to-day control over the management of such assets, irrespective of

whether or not they have the right to be consulted or to give directions; and

(b) the scheme or arrangement has the following characteristics,—

(i) the contribution of the persons participating in such scheme or

arrangement and the profits or income or dividend or any produce or

benefit out of which payments to be made to such person are pooled;

Registration of

investors.

Board to delegate

power of

registration.

Investment

schemes.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Pooled

investment

vehicles.

(ii) the contribution of the persons participating in such scheme or

arrangement or the asset acquired using the contributions is managed as

a whole by some person on behalf of the persons participating in such

scheme or arrangement; and

(iii) the arrangement is not regulated by any other regulatory

authority,

shall be an investment scheme.

(2) The following schemes and arrangements shall not be treated as

investment schemes—

(a) being made or offered by a co-operative society registered under the

Co-operative Societies Act, 1912 or a society registered or deemed to be

registered under any law relating to the co-operative societies for the time

being in force in any State; or

(b) being deposits which are accepted by a non-banking financial company

as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934; or

applies; or

(d) being any Scheme, Pension Scheme or the Insurance Scheme made

under the Employees Provident Fund and Miscellaneous Provisions

Act, 1952; or

(e) being a deposit as defined in clause (31) of section 2 of the

Companies Act, 2013 are accepted; or

(f) being deposits which are accepted by a company declared as a Nidhi or

a Mutual Benefit Society under section 406 of the Companies Act, 2013; or

(g) being a chit business as defined in clause (e) of section 2 of the Chit

Fund Act, 1982; or

(h) being deposits which are accepted for the purpose of real estate

project as defined in clause (zn) of section 2 of the Real Estate (Regulation

and Development) Act, 2016; or

(i) being a unit linked insurance policy or scrips or any such instrument

or unit, by whatever name called, which provides a component of investment

besides the component of insurance issued by an insurer as defined in

clause (9) of section 2 of the Insurance Act, 1938; or

(j) such other schemes or arrangements which the Central Government

may, in consultation with the Board, notify.

(3) The investment schemes shall be conducted, operated or promoted

including the matters relating to the contribution or subscription made by an

investor in such manner as may be specified by regulations.

33. (1) A pooled investment vehicle means a fund established in respect of an

investment scheme, in the form of a trust or otherwise, such as a mutual fund, an

alternative investment fund, a real estate investment trust, an infrastructure

investment trust or such other fund, which raises or collects money from investors

and invests such funds in such manner as may be specified by regulations.

(2) Notwithstanding anything contained in the Indian Trusts Act, 1882 or in

any other law for the time being in force or in any judgment, decree or order of any

court, tribunal or any other authority, a pooled investment vehicle, whether

constituted as a trust or otherwise, and registered with the Board, shall be eligible

to borrow and issue debt securities in such manner and to such extent as may be

specified by regulations.

2 of 1912.

2 of 1934.

4 of 1938.

19 of 1952.

18 of 2013.

40 of 1982.

16 of 2016.

4 of 1938.

2 of 1882.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

(3) Every pooled investment vehicle referred to in sub-section (2) shall,

subject to the provisions of the trust deed, be permitted to provide security interest

to lenders in terms of the facility documents entered into by such pooled

investment vehicle.

(4) Where any pooled investment vehicle referred to in sub-section (2),

defaults in repayment of principal amount or payment of interest or any such

amount due to the lender, the lender shall recover the defaulted amount and

enforce security interest, if any, against the trust assets, by initiating proceedings

against the trustee acting on behalf of such pooled investment vehicle in

accordance with the terms and conditions specified in the facility documents:

Provided that on initiation of the proceedings against the trust assets, the

trustee shall not be personally liable and his assets shall not be utilised towards

recovery of such debt.

(5) The trust assets, which remain after recovery of defaulted amount, shall

be remitted to the unit holders on a proportionate basis.

34. (1) An intermediary shall facilitate or provide services related to the

issue, sale, purchase or any dealings in securities in such manner as may be

specified by regulations.

(2) A stock broker shall charge brokerage, deliver securities and make

payment to the investor in such manner and within such period as may be specified

by regulations.

(3) The Board may, if required, notify a new category of intermediary for the

development of securities markets.

35. (1) The securities markets service provider shall make fair disclosure of

such information and at such frequency as may be specified by regulations.

(2) The securities markets service provider, market participant or a person

associated with securities markets shall furnish such information to the Board in

such manner as may be specified by regulations.

(3) The securities markets service provider shall invest money collected by it

in such manner and within such period as may be specified by regulations.

36. (1) The Board shall approve the governing norms of a self-regulatory

organisation.

(2) The governing norms of a self-regulatory organisation shall provide for

the governance and operation of any contracts or agreements between them and

their members including norms relating to the internal constitution and

management of their affairs.

CHAPTER V

REGISTRATION AND REGULATION OF MARKET INFRASTRUCTURE INSTITUTION

37. (1) No person shall carry on its business as a market infrastructure

institution, unless it is registered with the Board under this Code.

(2) Any person desirous of being registered as a market infrastructure

institution shall make an application to the Board in such form and manner and

accompanied by such fee, as may be specified by regulations, including a copy of

the bye-laws referred to in section 39 for the regulation and control of contracts

and a copy of documents relating in general to the constitution of the market

infrastructure institution and in particular to,––

(a) the governing body of such market infrastructure institution, its

constitution and powers of management and the manner in which its business

is to be transacted;

Intermediary.

Obligation of

securities markets

service provider,

market

participant, etc.

Governing norms

of self-regulatory

organisations.

Registration of

market

infrastructure

institution.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Cancellation of

registration or

suspension of

business.

(b) the powers and duties of the office bearers of the market

infrastructure institution;

classes of members, the qualifications for membership, and the exclusion,

suspension, expulsion and re-admission of members therefrom or thereinto;

(d) the procedure for the registration of partnerships as members of the

market infrastructure institution in cases where the rules provide for such

membership; and

(e) the nomination and appointment of authorised representatives and clerks.

(3) If the Board is satisfied, after making such inquiry as may be necessary in this

behalf and after obtaining such other information, if any, as it may require that,—

(a) the bye-laws of the market infrastructure institution are in

conformity with such conditions as may be specified by regulations, with a

view to ensure fair dealing and to protect the interest of investors;

(b) the applicant is willing to comply with any other conditions,

including conditions regarding its members, which the Board, after

consultation with the governing board of the applicant and having regard to

its standing and the nature of the securities dealt with by it, may impose for

the purpose of carrying out the objects of the Code; and

registration,

it may grant registration to the applicant in such form and subject to such

conditions as may be specified by regulations:

Provided that if the application is found to be defective, the Board may return

the application for rectification, if rectifiable, within such period as may be

specified by regulations.

(4) Every grant of registration to a market infrastructure institution under this

section shall be notified by the Board, and such registration shall have effect from

the date of its notification.

(5) No application for registration under this section shall be refused unless

an opportunity of being heard is given to the applicant and the reasons for such

refusal shall be communicated in writing.

38. (1) Without prejudice to clause (a) of section 20, if the Board is of the

opinion that the registration granted to a market infrastructure institution under

sub-section (4) of section 37, in the interest of trade or in public interest be cancelled,

the Board may by order cancel the registration in such manner as may be specified by

regulations, and it shall notify cancellation of such certificate of registration:

Provided that no order shall be made unless the applicant has been given an

opportunity of being heard.

(2) No cancellation under sub-section (1) shall affect the validity of any

contract entered into or made before the date of the notification, and the Board

may after consultation with the market infrastructure institution, make such

provisions as it deem fit in the notification of cancellation or in any subsequent

notification for the due performance of any contracts outstanding on that date.

(3) Without prejudice to sub-section (1), if in the opinion of the Board an

emergency has arisen and the Board considers it expedient for the purpose of

meeting the emergency, it may by notification and for reasons to be specified

therein, direct a market infrastructure institution to suspend such of its business for

such period not exceeding ninety days, subject to such conditions specified therein,

and, if, in the opinion of the Board, the interest of trade or public interest requires

that the period should be extended, it may, by a similar notification extend the said

period for a further period of ninety days:

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

Provided that where the period of suspension is to be extended beyond the

first period, no notification extending the period of suspension shall be issued,

unless the governing board of the market infrastructure institution has been given

an opportunity of being heard in the matter.

39. (1) A market infrastructure institution may, subject to the previous

approval of the Board, make bye-laws consistent with the provisions of this Code

and any rules or regulations made thereunder, for the regulation and control of

contracts and conduct of its members and market participants.

(2) In particular, and without prejudice to the generality of the foregoing

powers, such bye-laws may provide for the following matters, namely:—

(a) the appropriate mechanisms for safeguarding the interests of any

investors in securities and beneficial owners thereof;

(b) the manner of holding, custody, pledging, hypothecation, lending,

borrowing, issue, transfer, trading, transmission, conversion, transformation,

consolidation, switching, clearing, delivery, settlement and other dealings in

securities;

imposition of margins, position and price limits, circuit breakers, collateral

management, auction of short positions, order restrictions, account

suspensions, server placement and other technical requirements;

(d) the particular bye-laws, the contravention of which shall make a

contract entered into otherwise than in accordance with the bye-laws void

under section 47;

(e) the terms and conditions for accessing any services provided by the

market infrastructure institution;

(f) the listing of securities, the inclusion of any security for the purpose

of dealings and the suspension or withdrawal of any such securities, and the

suspension or prohibition of trading in securities;

(g) the procedure for disbursing of interest, dividend, bonus and other

monetary benefits arising from the holding, transfer, or any dealings in

securities;

(h) the norms of fair and time-bound disclosure of material information

by issuers;

(i) the internal control standards such as audits, review and monitoring;

(j) the inter se rights and obligations of members and market

participants;

(k) the terms, conditions and incidents of contracts, including the

prescription of margin requirements, if any, and the conditions relating

thereto, and the forms of contracts in writing;

(l)

the content, form and manner of executing member-client

agreements;

(m) the measures relating to regulation of fees charged by members,

dealings by members for their own account, maintenance of separation of

client funds and securities;

(n) the process of accrediting or empanelling persons providing

services in connection with any dealings in securities;

(o) the procedure for conveying information to members and market

participants;

Power of market

infrastructure

institution to

make bye-laws.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Power of Board

to direct bye-

laws to be made

or to make bye-

laws.

(p) the levy and recovery of fees and penalties;

(q) the conduct of inspections, filing of information and such other

matters in relation to regulation of its members;

(r) the obligations of members to supply such information or

explanation and to produce such documents relating to their business as may

be sought by the market infrastructure institution;

(s) the procedure for the settlement of claims or disputes or grievances

including settlement by mediation or arbitration including through electronic

means;

(t) the manner of conducting proceedings against the members and

market participants for committing breach of the bye-laws and provisions for

suspension, expulsion of members and market participants and cancellation

of agreements with the market infrastructure institution;

(u) such other matters as may be specified by regulations.

(3) The bye-laws of a market infrastructure institution shall endeavour to,—

(a) promote the objects of this Code;

(b) ensure non-discriminatory access to similarly placed persons using

its services;

the securities markets;

(d) foster transparency; and

(e) ensure interoperability with other market infrastructure institutions.

Explanation.—For the purposes of this sub-section, the expressions,––

(i) “non-discriminatory access” means not creating differential obligations

for similarly placed persons or not preventing similarly placed persons from

availing a service provided by the market infrastructure institution; and

(ii) “transparency” means that adequate information about the functions

and transactions carried out on the market infrastructure institution is

available to all the persons availing the services provided by it to enable them

to make informed decisions about their transactions.

(4) Any bye-laws made under this section shall be subject to public

consultation and be approved and notified by the Board:

Provided that the Board in the interest of trade or in public interest may, by

an order and for the reasons to be recorded in writing, dispense with the condition

of public consultation.

(5) The Board may either on a request in writing received by it from the

governing board of a market infrastructure institution or on its own motion, may

after consultation with the governing board, make or amend bye-laws for all or any

of the matters specified in sub-section (2), after recording the reasons thereof.

40. (1) Where, after consultation with the governing bodies of market

infrastructure institution generally or with the governing body of any market

infrastructure institution in particular, the Board is of the opinion that it is

necessary or expedient so to do, it may, by order in writing together with a

statement of the reasons therefor, direct market infrastructure institution generally

or any market infrastructure institution in particular, as the case may be, to make

any bye-laws or to amend any bye-laws already made in respect of all or any of the

matters specified in sub-section (2) of section 39 within a period of two months

from the date of the order.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

18 of 2013.

(2) If any market infrastructure institution fails or neglects to comply with any

order made under sub-section (1) within the period specified therein, the Board may

make the bye-laws or amend the bye-laws made by the market infrastructure institution

either in the form proposed in the order or with such modifications thereof, as may be

agreed to between the market infrastructure institution and the Board.

(3) Where in pursuance of this section any bye-laws have been made or

amended, the bye-laws so made or amended shall be published in the Official

Gazette, and, on the publication thereof, the bye-laws so made or amended shall,

notwithstanding anything to the contrary contained in the Companies Act, 2013, or

in any other law for the time being in force, have effect, as if they had been made

or amended by the market infrastructure institution.

41. (1) Where a member contravenes any provision of the bye-laws, the

market infrastructure institution may, by an order take one or more of the

following actions against such member, namely:—

(a) impose penalty;

(b) expel from membership;

(d) annul any transactions or contracts;

(e) direct to pay compensation to the affected party;

(f) suspend or freeze account, collaterals, or security deposits under the

management of market infrastructure institution; and

(g) any other similar action not involving the payment of money:

Provided that before passing an order under clauses (b) to (g), an opportunity

of being heard shall be given to such member.

(2) The market infrastructure institution shall have the mechanisms to,—

(a) monitor and identify contravention of the provisions of this Code

and the rules or regulations or bye-laws made thereunder;

(b) inform the Board of any such contraventions;

or market participant who contravenes the bye-laws;

(d) undertake such other matters,

as may be specified by regulations.

42. (1) A market infrastructure institution shall have diversified ownership by

way of shareholding, subject to the following conditions,––

(a) the members of a market infrastructure institution shall not

collectively own more than such percentage of the equity shareholding in

market infrastructure institution;

(b) such maximum ownership interest is held by a class or classes of

persons in a market infrastructure institution;

infrastructure institution is held by a person;

(d) such ownership interest of different class or classes of persons is

calculated and the manner of calculation thereof;

(e) such levels of cross holding of a market infrastructure institution in

other market infrastructure institutions and the acquisition or takeover or merger

or consolidation of business amongst market infrastructure institution;

Action for

contravention of

bye-laws.

Ownership norms

of market

infrastructure

institution.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Annual report.

Power of Central

Government to

supersede.

(f) such period within which compliance of the ownership norms, may

be achieved; and

(g) such other diversified ownership norms,

as may be specified by regulations.

(2) A market infrastructure institution shall be managed in such manner

that,––

(a) the members of the governing board are eligible and qualified, and

meet the fit and proper criteria;

(b) the independent members are appointed on the governing board;

the governing board; and

(d) other appropriate measures are undertaken for ensuring good

governance to avoid any conflict of interest,

as may be specified by regulations.

(3) A market infrastructure institution shall be a company limited by shares

and shall be demutualised in such manner as may be specified by regulations.

Explanation.—For the purposes of this sub-section, the expressions,—

(i) “company limited by shares” shall have the same meaning as

assigned to it in clause (22) of section 2 of the Companies Act, 2013;

(ii)

“demutualised” means segregation of the ownership and

management from the trading rights or clearing rights, or such other

operational rights of the members of a market infrastructure institution, as the

case may be.

(4) The provisions of this section shall apply notwithstanding anything to the

contrary contained in the Competition Act, 2002 or the Companies Act, 2013.

43. A market infrastructure institution shall furnish a copy of its annual

report and other information to the Board in such manner as may be specified by

regulations.

44. (1) Without prejudice to any other powers vested in the Central

Government under this Code, where the Central Government, on the

recommendation of the Board, is of the opinion that the governing board of a

market infrastructure institution or a self-regulatory organisation should be

superseded, then, notwithstanding anything contained in any other law for the time

being in force, it may serve on the governing board a written notice that it is

considering the supersession of the governing board for the reasons specified in the

notice and after giving an opportunity of being heard, it may, by notification,

declare the governing board of such market infrastructure institution or

self-regulatory organisation to be superseded, and may appoint any person or

persons to exercise and perform all the powers and duties of the governing board,

and, where more persons than one person are appointed, may appoint one of such

persons to be the chairperson and another to be the vice-chairperson thereof.

(2) On the publication of a notification under sub-section (1), the following

consequences shall ensue, namely:—

(a) the members of the governing board which has been superseded

shall, from the date of supersession, cease to hold office as such members;

(b) the person or persons appointed under sub-section (1) may exercise

and perform all the powers and duties of the governing board which has been

superseded; and

18 of 2013.

12 of 2003.

18 of 2013.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

self-regulatory organisation shall vest in such person or persons under

sub-section (1) as being necessary for the purpose of enabling him or them to

carry on the business of the market infrastructure institution or

self-regulatory organisation.

(3) On the supersession of the board of a market infrastructure institution or

self-regulatory organisation under sub-section (1), the person or persons appointed

shall hold office for such period as may be specified in the notification and the

Central Government may from time to time, by like notification, vary such period.

(4) The Central Government may at any time before the determination of the

period of office of any person or persons appointed under this section, call upon

the market infrastructure institution or the self-regulatory organisation to

re-constitute the governing board in accordance with its bye-laws and on such

re-constitution, all the property of the market infrastructure institution or

self-regulatory organisation which has vested in, or was in the possession of, the

person or persons appointed under sub-section (1), shall re-vest or vest, as the case

may be, in the governing board so re-constituted:

Provided that until a governing board is so re-constituted, the person or

persons appointed under sub-section (1) shall continue to exercise the powers and

perform the duties.

CHAPTER VI

REGULATION OF CONTRACTS

45. (1) Unless otherwise permitted under this Code and the rules or

regulations made thereunder or any other law for the time being in force, every

contract for sale or purchase of securities, which is entered into otherwise than

between members of a stock exchange or stock exchanges or through or with such

member, shall be illegal:

Provided that the Central Government may notify any contract, which may

be entered into otherwise than between members of a stock exchange or stock

exchanges or through or with such member, to be legal.

(2) Any contract entered into between members of two or more stock

exchanges shall—

(a) be subject to such terms and conditions as may be specified by the

respective stock exchanges with the prior approval of the Board; and

(b) require prior permission from the respective stock exchanges, if so,

specified by the stock exchanges with the prior approval of the Board.

(3) If the Central Government is satisfied that having regard to the nature or

the volume of transactions in securities, it is necessary to prohibit contracts in

certain cases, it may by notification, declare that no person shall, without the

permission of the Central Government, enter into any contract for the sale or

purchase of any security specified in the notification, except to the extent and in

the manner, if any, specified therein.

(4) All contracts in contravention of the provisions of sub-section (3) entered

into after the date of the notification issued thereunder shall be illegal.

46. Notwithstanding anything contained in any other law for the time being

in force, any contract including contracts that are traded on a stock exchange or

settled on a clearing corporation shall be legal and valid, if such contracts are made

in accordance with the provisions of this Code and the rules or regulations or

bye-laws made thereunder.

Contracts to be

illegal in certain

circumstances.

Validity of

contracts.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Contracts in

contravention of

bye-laws to be

void.

Exemptions for

certain contracts.

Derivatives in

respect of

commodity.

47. Any contract which is in contravention of any bye-laws of a stock

exchange specified in that behalf shall be void under clause (d) of

sub-section (2) of section 39 with respect to,—

(a) the rights of any member of the stock exchange who has entered

into such contract in contravention of such bye-laws; and

(b) the rights of any other person who has knowingly participated in

the transaction entailing such contravention:

Provided that nothing in this section shall be construed to affect the rights

of a person other than a member of the stock exchange to enforce any such

contract or to recover any sum under or in respect of such contract, if such

person had no knowledge that the transaction was in contravention of any of

the bye-laws specified in clause (d) of sub-section (2) of section 39.

48. Notwithstanding anything contained in this Code or any other law for

the time being in force, a contract for sale or purchase of or other dealings in

securities falling under any one or more clauses mentioned hereunder, shall not

be deemed to be illegal and nothing in this Code shall be construed as requiring

any person or persons desirous of entering into such contracts to obtain prior

permission of the Board,—

(a) a spot delivery contract;

(b) a non-transferable specific delivery contract;

tag-along or drag-along rights or such other similar rights contained in

shareholders agreements or any investor agreement or articles of

association of companies or other body corporate;

(d) contracts in shareholders agreements or articles of association of

companies or other body corporate, for purchase or sale of securities

pursuant to exercise of an option contained therein to buy or sell the

securities, where—

(i) the title and ownership of the underlying securities is held

continuously by the selling party to such contract for a minimum

period of one year from the date of entering into the contract;

(ii) the price or consideration payable for the sale or purchase

of the underlying securities pursuant to exercise of any option

contained therein is in compliance with the laws for the time being

in force as applicable; and

(iii) the contract is settled by way of actual delivery of the

underlying securities;

(e) standing agreements or arrangements for delivery or supply of

commodities;

(f)

contracts, including derivatives under the provisions of

Chapter IIID of the Reserve Bank of India Act, 1934; or

(g) contracts between such parties relating to such matters, on such

terms and conditions as the Central Government may by notification specify.

49. The Central Government may in consultation with the Board, notify

such commodities in respect of which a derivative may be entered into or made

by any person.

2 of 1934.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

2 of 1934.

50. (1) If the Central Government is of the opinion that in the interest of trade

or in public interest, it is expedient to regulate and control non-transferable specific

delivery contracts in commodities or securities or the business of dealing in spot

delivery contracts, it may, by notification, declare that all or any of the provisions

of this Code shall apply to,––

(a) such class or classes of non-transferable specific delivery contracts

in respect of such commodities or securities or class of commodities or

securities;

(b) such class or classes of spot delivery contracts for the sale or

purchase of such securities,

as may be specified therein.

Explanation.––For the purposes of this Chapter, the expressions,––

(i) “specific delivery contract” means a derivative which provides for the

actual delivery of specific qualities or types of underlying during a stipulated

future period at a price fixed thereby or to be fixed in the manner thereby agreed

and in which names of both the buyer and the seller are mentioned;

(ii) “non-transferable specific delivery contract” means a specific

delivery contract, the rights or liabilities under which or under any delivery

order, railway receipt, bill of lading, warehouse receipt or any other

documents of title relating thereto are not transferable;

(iii) “spot delivery contract” means a contract which is not executed on

a stock exchange and provides for,—

(a) actual delivery of securities and the payment of price, either

on the same day as the date of the contract or on the next day, the

actual period taken for the despatch of the securities or the remittance

of money through post being excluded from the computation of the

period aforesaid, if the parties to the contract do not reside in the same

town or locality; or

(b) the delivery of commodities and the payment of price, either

immediately, or within such period not exceeding eleven days after the

date of the contract inclusive of the actual period taken for the despatch

of the commodities through post or road or any such physical means

and subject to such conditions as the Central Government may notify in

respect of any commodities, and where the period under such contract

is not being capable of extension by the mutual consent of the parties

thereto or otherwise, but shall not include such contracts performed

either wholly or in part,––

(i) by realisation of any sum of money being the difference

between the contract rate and the settlement rate or clearing rate

or the rate of any offsetting contract; or

(ii) by any other means whatsoever, and as a result of which

the actual tendering of the goods covered by the contract or

payment of the full price therefor is dispensed with.

(2) A transferable specific delivery contract shall be subject to the provisions

of this Code and shall be entered into or made on a stock exchange except for such

contracts specified under Chapter IIID of the Reserve Bank of India Act, 1934.

Explanation.––For the purposes of this Chapter, “transferable specific

delivery contract” means a specific delivery contract, which is not a non-

transferable specific delivery contract and is subject to such conditions relating to

its transferability as may be notified by the Central Government.

Non-transferable

specific delivery

contract, spot

delivery contract

and transferable

specific delivery

contract.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Prohibition of

performance of

contracts without

registration.

Manner of

dealing in

securities

through market

infrastructure

institution.

Rights of holder

of securities to

dividends and

income in

respect of

securities.

51. No person shall organise or assist in organising or become a member of

any association or entity in any area which provides facilities for the performance

of any contracts in securities, without being registered with the Board or permitted

under Chapter IIID of the Reserve Bank of India Act, 1934 or specifically

exempted by the Central Government by notification.

52. (1) No person shall deal in securities on a market infrastructure institution

unless it is admitted as a member or a client of a member or a principal, in such

manner as may be specified by regulations or bye-laws.

(2) No member shall in respect of any securities enter into any contract as a

principal with any person other than a member, unless it has secured the consent or

authority of such person and discloses in the note, the memorandum or the

agreement of sale or purchase that it is acting as a principal:

Provided that where the member has secured the consent or authority of such

person otherwise than in writing, he shall secure written confirmation by such

person or such consent or authority within three days from the date of the contract:

Provided further that no such written consent or authority of such person

shall be necessary for closing out any outstanding contract entered into by such

person in accordance with the bye-laws, if the member discloses in the note, the

memorandum or the agreement of sale or purchase in respect of such closing out

that it is acting as a principal.

53. (1) It shall be lawful for the holder of any security whose name appears

on the books of the issuer issuing the said security to receive and retain any

dividend or profit or income or return of any kind declared by the issuer in respect

thereof for any year, irrespective of the said security that has already been

transferred by it for consideration, unless the transferee who claims such dividend

or profit or income or return from the transferor has lodged the security and all

other documents relating to the transfer which may be required by the issuer, with

the issuer for being registered in its name within a period of fifteen days of the date

on which the dividend or profit or income or return became due.

(2) The period specified in sub-section (1) shall be extended,—

(a) in case of death of the transferee, by the actual period taken by his

legal representative to establish his claim to the dividend or profit or income

or return;

(b) in case of loss of the transfer deed by theft or any other cause

beyond the control of the transferee, by the actual period taken for the

replacement thereof; and

relating to the transfer due to reasons connected with the post, by the actual

period of the delay.

(3) Nothing contained in sub-section (1) shall affect,—

(a) the right of an issuer to pay any dividend or profit or income or

return which has become due to any person whose name is for the time being

registered in the books of the issuer as the holder of the security in respect of

which the dividend or profit or income or return has become due; or

(b) the right of the transferee of any security to enforce against the

transferor or any other person his rights, if any, in relation to the transfer in

any case where the issuer has refused to register the transfer of the security in

the name of the transferee.

2 of 1934.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

38 of 2006.

2 of 1934.

18 of 2013.

CHAPTER VII

HOLDING OF SECURITIES

54. (1) The powers of the Board shall extend to,—

(a) depository services provided by a depository; and

(b) any other regulated instrument, subject to such conditions and

procedures as may be specified by regulations, for the issuance and holding of

other regulated instrument through depositories, subject to the provisions

contained in section 118.

(2) Nothing contained in this Chapter shall apply to Government security

unless an agreement is executed to the contrary by any depository with the

Government or Reserve Bank, as the case may be, under the provisions of the

Government Securities Act, 2006 and the Reserve Bank of India Act, 1934.

55. (1) All securities or other regulated instrument held by a depository shall

be dematerialised and in a fungible form.

(2) Every issuer offering securities for subscription to any person shall allot

such securities in dematerialised form and every person subscribing to securities

offered by an issuer shall hold such securities with a depository:

Provided that nothing shall affect the rights of a person to continue holding

previously issued securities in physical form after the date of commencement of the

Code unless such person intends to sell or transfer such securities, in which case,

such securities shall have to be dematerialised first.

(3) Where securities are held with a depository under sub-section (2), the

issuer shall inform such depository regarding the details of allotment of the security,

and on receipt of such information the depository shall enter the name of the allottee

as the beneficial owner of that security in its records.

(4) Nothing contained in sections 88 and 89 of the Companies Act, 2013, shall

apply to a depository in respect of securities or other regulated instrument held by

it on behalf of the beneficial owners.

56. (1) Any person who has entered into an agreement through a depository

participant, in the form specified by the bye-laws, with any depository for availing

its services, shall surrender the certificate of security or other regulated instrument

for which he seeks to avail the services of a depository, to the issuer of such security

or other regulated instrument in such manner as may be specified by regulations.

(2) The issuer of such security or other regulated instrument, on receipt of

certificate of security or other regulated instrument under sub-section (1), shall

cancel such certificate or instrument and enter the name of the depository in respect

of that security or other regulated instrument in its records and inform the depository

within such period as may be specified by regulations.

(3) A depository shall, on receipt of information under sub-section (2), enter

the name of the person referred to in sub-section (1) in its records, as the beneficial

owner.

(4) A depository shall dematerialise the certificate of securities within such

period as may be specified by regulations.

57. Every depository shall maintain a register and an index of beneficial

owners in the manner provided in section 88 of the Companies Act, 2013 and

maintain any other particulars as may be specified by regulations or required by any

other regulatory authority, where applicable.

Power of Board

in respect of

depository

services.

Securities to be

in dematerialised

and fungible

form.

Process of

dematerialisation.

Depository to

maintain a

beneficial

owners.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Registration of

transfer of

security, etc.

Pledge or

hypothecation of

securities or

other regulated

instrument held

through

depository.

Furnishing of

information and

records by

depository and

issuer.

Rights of

registered owner

and beneficial

owner.

58. (1) Every depository shall on receipt of information from a depository

participant register the transfer of security or other regulated instrument in the name

of the transferee.

(2) The records of a depository in respect of any security or other regulated

instrument shall be conclusive proof of title of the transferee over such security or

other regulated instrument, as the case may be.

(3) Every depository on receipt of information from a depository participant,

with or consequent upon transfer or assignment of financial asset of any bank or

financial institution under sub-section (1) of section 5 of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

(4) Every depository, on receipt of information from a depository

participant, register any issue of new shares in favour of any bank or financial

institution or asset reconstruction company or any other assignee of such bank or

financial institution or asset reconstruction company, as the case may be, by

conversion of part of their debt into shares pursuant to reconstruction of debt of

the company agreed between the company and the bank or financial institution or

asset reconstruction company.

Explanation.––For the purposes of this section, the expressions “asset

reconstruction company”, “bank”, and “financial institution” shall have the same

meanings as assigned to them respectively in clauses (ba), (c) and (m) of

sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002.

59. (1) Subject to such regulations and bye-laws, as may be made in this

behalf, a beneficial owner may with the previous approval of the depository, create

a pledge or hypothecation in respect of a security or other regulated instrument

owned by it through a depository.

(2) Every beneficial owner shall give information of such pledge or

hypothecation to the depository and such depository shall thereupon make entries

in its records accordingly and such entry shall be the conclusive proof of such pledge

or hypothecation, as the case may be.

60. (1) Every depository shall furnish to the issuer, information about the

transfer of securities or other regulated instruments in the name of beneficial owners

at such intervals and in such manner as may be provided by the bye-laws.

(2) Every issuer shall make available to the depository, copies of the relevant

records in respect of securities or other regulated instrument held by such

depository.

61. (1) Notwithstanding anything contained in any other law for the time being

in force, a depository shall be deemed to be the registered owner for the purposes of

effecting transfer of ownership of security or other regulated instrument on behalf

of a beneficial owner.

Explanation.––For the purposes of this section, the registered owner is a

depository whose name has been entered as such in the register of the issuer.

(2) Save as otherwise provided in sub-section (1), the depository as a

registered owner shall not have any voting rights or any other rights in respect of

securities or other regulated instrument held by it.

(3) The beneficial owner shall be entitled to all the rights and benefits and be

subject to all the liabilities in respect of its securities or other regulated instrument

held by a depository.

54 of 2002.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

18 of 1891.

62. (1) Subject to the provisions of this Code, the rights and obligations of the

depositories, depository participants and the issuers whose securities or other

regulated instrument are dealt with by a depository shall be such as may be specified

by regulations.

(2) The eligibility criteria for admission of securities or other regulated

instrument into a depository and the manner of holding and transfer of such

securities and other regulated instrument shall be such as may be specified by

regulations.

(3) The manner of exercising the rights and interest in or arising from any

securities or other regulated instrument held with the depository and any other

connected operational or incidental matters shall be such as may be specified by

regulations.

(4) Every depository shall maintain records relating to the beneficial owners

of all securities or other regulated instrument held with it including records of clients

of any depository participants in such manner as may be specified by regulations.

(5) Every depository shall adopt such procedures to prevent misappropriation

of, or unauthorised access to, any securities or other regulated instrument held with

it and shall adopt such good practices as may be specified by regulations for

safeguarding the interests of the beneficial owners.

(6) Without prejudice to the provisions contained in any other law for the time

being in force, the depository shall indemnify such beneficial owner for any loss

caused to the beneficial owner due to the negligence of the depository or its member.

(7) Where the depository has indemnified due to the negligence of its member

under sub-section (6), it shall have the right to recover the same from such member.

63. The Bankers’ Books Evidence Act, 1891 shall apply in relation to a

depository as if it were a bank as defined in clause (2) of section 2 of that Act.

CHAPTER VIII

LISTING AND DELISTING OF SECURITIES

64. (1) Without prejudice to the provisions of this Code or any other law for

the time being in force, no securities shall be offered to the public or listed on a

stock exchange unless the issuer fulfils such eligibility criteria and complies with

such requirements as may be specified by regulations.

(2) Every issuer intending to offer securities to the public or for listing, before

issuing the offer document, shall make an application to each stock exchange for

permission to list and shall comply with such conditions as may be specified by

regulations.

(3) Where securities are listed on any stock exchange, such person shall

comply with the conditions of the listing agreement with that stock exchange and

such other conditions as may be specified by regulations.

(4) Where the permission under sub-section (2) has not been granted or

refused, the issuer shall forthwith repay all money, if any, received from the

applicant within such period and in such manner as may be specified by regulations

and the issuer and every director or trustee thereof, as the case may be, who is in

default shall be jointly and severally liable to repay that money.

(5) The Board may, by general or special order,—

(a) prohibit any company from issuing prospectus, any offer document, or

advertisement soliciting money from the public for the issue of securities; or

Rights and

obligations of

depository.

Bankers’ Books

Evidence

Act, 1891 to

apply to

depositories.

Public issue and

listing of

securities.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Listing and

disclosure

requirements.

Delisting of

securities.

Refusal for

listing or

delisting of

securities.

Netting and

settlement.

(b) specify the conditions subject to which the prospectus, the offer

document or advertisement, if not prohibited, may be issued.

65. (1) The requirements for issuer in matters relating to issue of capital,

minimum offer size, issue and transfer of securities, corporate governance

requirements, disclosures by issuers, substantial acquisition of shares and take-over

of companies, public shareholding norms, concentration norms and prudential

norms, risk management and any other matters incidental thereto may be such, as

may be specified by regulations.

(2) Without prejudice to anything contained in sub-section (1), the Central

Government may by notification in the public interest, exempt any listed public

sector company from any or all of the requirements specified in sub-section (1).

Explanation.––For the purposes of this sub-section, “public sector company”

means a body corporate constituted by an Act of Parliament or any State Legislature

and includes a Government company as defined in clause (45) of section 2 of the

Companies Act, 2013.

66. (1) An issuer may apply to stock exchange to get its securities delisted

from such stock exchange in such manner as may be specified by regulations.

(2) Without prejudice to sub-section (1), a stock exchange may delist the

securities of an issuer, after recording the reasons therefor, for continued

contravention of any listing conditions or on any of the grounds as may be specified

by regulations:

Provided that the securities of an issuer shall not be delisted unless such issuer

has been given an opportunity of being heard.

67. Where a stock exchange refuses to list or delist the securities of an issuer,

such stock exchange shall furnish reasons for such refusal to such issuer in writing.

CHAPTER IX

NETTING AND SETTLEMENT

68. (1) Notwithstanding anything contained in any other law for the time being

in force,—

(a) the settlement of transactions undertaken on a stock exchange or

clearing corporation shall be conducted in accordance with the settlement

procedure, including netting or gross settlement, as specified in the bye-laws

of such stock exchange or clearing corporation, as the case may be, with the

prior approval of the Board; and

(b) a settlement, whether gross or net, effected under clause (a) shall be

final and irrevocable as soon as the money, securities or other assets payable

is determined, whether or not such money, securities or other assets are

actually paid.

(2) Where a trading member, a clearing member or any of their clients is

declared by a court of competent jurisdiction or tribunal as insolvent or is dissolved,

wound-up or resolved, or a liquidator, an interim resolution professional, a

resolution professional, an administrator, receiver or assignee, by whatever name

called, whether provisional or otherwise, is appointed in a proceeding relating to

insolvency, resolution or dissolution or winding-up of such member, then,––

(a) any order of adjudication, dissolution, winding-up, or resolution, as

the case may be, shall not affect any settlement that has become final and

irrevocable under sub-section (1); and

18 of 2013.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

31 of 2016.

18 of 2013.

(b) the right of a clearing corporation or stock exchange, as the case may

be, to appropriate any collaterals or deposits or margins contributed by the

said trading member or clearing member or client towards its settlement or

other obligations, in accordance with the bye-laws of such stock exchange or

clearing corporation, as the case may be, shall remain unaffected.

(3) Where an order referred to in clause (a) of sub-section (2) is made with

respect to a clearing corporation or a stock exchange, as the case may be, then,

irrespective of such order or anything in any other law for the time being in force,

the payment obligations and settlement instructions between the clearing

corporation and the clearing members including those arising from transactions

admitted for settlement at a future date, shall be determined forthwith by the clearing

corporation, in accordance with the gross settlement or netting procedure, as the

case may be, under the bye-laws of such clearing corporation, and such

determination shall be final and irrevocable.

(4) Notwithstanding anything contained in any other law for the time being in

force, any resolution professional, liquidator, administrator, receiver or assignee, by

whatever name called, of a clearing corporation, whether appointed provisionally or

otherwise, shall—

(a) not re-open any determination that has become final and irrevocable

under sub-section (3);

(b) after appropriating in accordance with the bye-laws of the clearing

corporation, the collaterals provided by the clearing members towards their

settlement or other obligations, return the collaterals held in excess to the

clearing members concerned; and

dues arising out of settlement obligations of the clearing corporation and

thereafter apply the assets against third party claims.

Explanation.––For the purposes of this section, the expressions––

(i) “netting” means the determination by a clearing corporation of—

(A) net payment;

(B) delivery obligations of the clearing members by setting off;

buying and selling of securities, including the claims and obligations

arising out of the determination by the clearing corporation, a stock

exchange, on the insolvency, winding-up, liquidation or resolution of

any clearing member, trading member or client; or

(D) such other circumstances of the transactions admitted for

settlement at a future date so that only a net claim be demanded, or a net

obligation be owed as the clearing corporation may specify in its

bye-laws;

(ii) “resolution professional” shall have the same meaning as assigned to

it in the Insolvency and Bankruptcy Code, 2016 and “liquidator” shall have

the same meaning as assigned to it in the Companies Act, 2013 and the

Insolvency and Bankruptcy Code, 2016.

69. A market infrastructure institution shall implement delivery arrangements

in respect of contracts in securities including derivatives, in such form and manner

as may be specified by regulations.

Delivery

arrangements of

contracts in

securities.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Right of a

clearing

corporation shall

have precedence

over other right

and attachments.

Investor charter.

Investor

grievance

redressal

mechanism.

Board to

designate

Ombudsperson

to redress

grievances.

Procedure for

filing of

grievance and

complaint.

70. Subject to the provisions of the Insolvency and Bankruptcy Code, 2016,

the right of a clearing corporation to recover its dues from the clearing members,

incurred in discharge of their clearing and settlement functions from the collaterals,

deposits and other assets of clearing members held by the clearing corporation for

this purpose shall,––

(a) in case of insolvency, winding-up, liquidation or resolution, as the

case may be, of such clearing member, have precedence over the rights of any

other person in such insolvency, winding-up, liquidation or resolution

proceedings;

(b) to the extent of the claims of the clearing corporation, have priority

over any other attachment by any authority constituted under any law for the

time being in force.

CHAPTER X

INVESTOR CHARTER AND INVESTOR GRIEVANCE REDRESSAL MECHANISMS

71. The Board may make an investor charter which shall provide for the

principles for protection of investors and facilitate their participation in the

securities markets, and such other matters concerning the investors, in such manner

as may be specified by regulations.

72. (1) The Board may provide for an investor grievance redressal mechanism

and direct securities markets service provider or issuer or its agent to provide for

similar mechanisms to receive, monitor and redress investor grievances in such

manner and within such period, as may be specified by regulations.

(2) Upon receipt of a grievance from an investor as per the mechanism

provided under sub-section (1), the Board, the securities markets service provider,

or the issuer shall, within such period as may be specified by regulations, not

exceeding seven days, inform the investor about the receipt of the grievance.

73. (1) The Board may designate one or more of its officers as Ombudsperson

to receive and redress grievances of investors under this Chapter.

(2) The Ombudsperson shall sit at such places having jurisdiction over such

areas as the Board may notify in this behalf.

(3) The Ombudsperson shall redress the grievances in such manner, subject to

such timelines, as may be specified by regulations.

74. (1) Any investor aggrieved by the deficiency in services rendered by a

securities markets service provider or any act or omission of an issuer, shall resolve

his grievance through the investor grievance redressal mechanisms referred to in

section 72 within a period of one hundred and eighty days from the date of first

filing of such grievance.

(2) If the grievance of investor is not resolved within the period specified

above, he may file a complaint in writing with the Ombudsperson within a period

of thirty days in such form and manner as may be specified by regulations:

Provided that no complaint shall be maintainable where the investor has

initiated a proceeding before any court, tribunal, or authority in respect of a matter

which is directly or substantially in issue of such complaint.

Explanation.––For the purposes of this sub-section, the expression

“deficiency” means any fault, imperfection, shortcoming or inadequacy in the

quality, nature and manner of performance which is required to be maintained by or

under this Code, or any rules and regulations made thereunder, or has been

undertaken to be performed by a securities markets service provider in pursuance of

a contract or otherwise in relation to any service in the securities markets and

includes—

31 of 2016.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

5 of 1908.

15 of 1992.

(i) any act of negligence or omission or commission by such person

which causes loss or injury to the investor; and

(ii) deliberate withholding of relevant information by such person to the

investor.

(3) Any proceeding before the investor grievance redressal mechanisms under

section 72 shall abate on filing of the complaint with the Ombudsperson.

75. (1) Where the Ombudsperson is satisfied that the averments contained in

the complaint are true, he shall redress the complaint and may, by an order in

writing, direct the respondent to—

(a) comply with its obligations;

(b) return the fees, charges or such other amount to the complainant,

jointly or severally; or

by regulations:

Provided that no order shall be passed unless the complainant and the

respondent have been given an opportunity of being heard.

(2) Any order made under sub-section (1) shall be binding on the complainant

and the respondent.

76. At the time of redressal of complaint, if the Ombudsperson is of the

opinion that the respondent has contravened any of the provisions of this Code or

the rules or regulations made thereunder, he may inform the Board of such

contravention.

77. While exercising the powers under this Code, the Ombudsperson shall

have the same powers as are vested in a civil court under the Code of Civil

Procedure, 1908 while trying a suit, in respect of the following matters, namely:—

(a) discovery and inspection of documents;

(b) summoning and enforcing the attendance of any person and

examining him on oath;

compelling production of books of account and other records; and

(d) dismissing an application for default or deciding it ex parte.

78. No order made by the Ombudsperson shall bar the Board from taking any

other action under this Code.

CHAPTER XI

SECURITIES APPELLATE TRIBUNAL

79. The Securities Appellate Tribunal established under section 15K of the

Securities and Exchange Board of India Act, 1992 shall be deemed to be the

Securities Appellate Tribunal for the purposes of this Code.

80. (1) The Tribunal shall consist of a Presiding Officer and such number of

Judicial and Technical Members, as the Central Government may by notification

determine, to exercise the powers and discharge the functions conferred on the

Tribunal under this Code or any other law for the time being in force.

(2) Subject to the provisions of this Code,—

Order of

Ombudsperson.

Ombudsperson

to inform Board

regarding

contravention of

Code.

Ombudsperson

to have certain

powers of civil

court.

Orders of

Ombudsperson

not to bar Board

from taking any

action.

Securities

Appellate

Tribunal.

Composition of

Tribunal and its

Benches.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Appointment,

qualifications,

terms and

conditions of

service of

Presiding

Officer and

Members.

Filling up of

vacancies.

Senior-most

Judicial Member

to act as

Presiding

Officer in certain

circumstances.

Officers and

employees of

Tribunal.

(a) the jurisdiction, powers and authority of the Tribunal may be

exercised by Benches thereof;

(b) the Benches of the Tribunal shall ordinarily sit at Mumbai and at such

other places as the Central Government may, in consultation with the

Presiding Officer, notify;

with two or more Judicial and Technical Members as he may deem fit:

Provided that every Bench shall consist of at least one Judicial and one

Technical Member:

Provided further that in the absence of a Technical Member due to vacancy, a

Bench may consist of the Presiding Officer and a Judicial Member.

Explanation.––For the purposes of sub-section (2), unless the context

otherwise requires, a reference to “Judicial Member” shall also include “Presiding

Officer”.

(3) Notwithstanding anything contained in sub-section (2), the Presiding

Officer may transfer a Judicial or a Technical Member from one Bench to another

Bench.

81. (1) The appointment, qualifications, term of office, salaries and

allowances, resignation, removal and the other terms and conditions of

service of the Presiding Officer and other Members of the Tribunal shall be

governed by the provisions of the law applicable to tribunals and the rules and

regulations made thereunder.

Explanation.––For the purposes of sub-section (1), unless the context

otherwise requires, “Member” means a Judicial Member and a Technical Member.

(2) On the date of commencement of this Code, the Presiding Officer and the

Member of the Tribunal, shall continue to hold such office under the corresponding

provisions of this Code till the completion of the remainder period, unless removed

under the provisions of the law applicable to tribunals and the rules and regulations

made thereunder.

(3) A Member of the Board referred to in sub-section (1) of section 4, or a

member or part-time member of the Insurance Regulatory and Development

Authority of India, the Pension Fund Regulatory and Development Authority or the

International Financial Services Centres Authority, or any person at senior

management level equivalent to the Executive Director of the Board or in such

Authorities, shall not be appointed as Member of the Tribunal, during his service or

tenure as such with the Board or with such Authorities, as the case may be, or within

a period of two years from the date on which he ceases to hold office as such in the

Board or in such Authorities.

82. If any vacancy occurs in the office of the Presiding Officer or any other

Member of the Tribunal, the Central Government shall appoint another person in

accordance with the provisions of the law applicable to tribunals and the rules and

regulations made thereunder to fill the vacancy and the proceedings may be

continued before the Tribunal from the stage at which the vacancy is filled.

83. If any vacancy occurs in the office of the Presiding Officer by reason of

his death, resignation or otherwise, the senior-most Judicial Member of the Tribunal

shall act as the Presiding Officer until the date on which a new Presiding Officer is

appointed and assumes charge.

84. (1) The Central Government shall provide the Tribunal with such officers

and employees as it may deem fit.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

_______________________________________________________________

______

_______________________________________________________________

______

(2) The officers and employees of the Tribunal shall discharge their functions

under the general superintendence of the Presiding Officer.

(3) The salaries, allowances and other conditions of service of the officers and

employees of the Tribunal shall be such as may be prescribed.

85. (1) Any person aggrieved by,—

(a) an order passed under section 20;

(b) an order passed under sub-section (1) of section 21;

(d) an order passed or a decision made under clause (a) of

sub-section (1) of section 29 or sub-section (1) of section 38;

(e) an order passed under clause (b) of sub-section (3) of section 31;

(f) an order passed under sub-section (1) of section 75;

(g) an order passed or decision made by any market infrastructure

institution; or

(h) an order passed by the Insurance Regulatory and Development

Authority of India, the Pension Fund Regulatory and Development Authority

or the International Financial Services Centres Authority,

may prefer an appeal to the Tribunal having jurisdiction in the matter.

(2) Without prejudice to the provisions of sub-section (1), an appeal may be

preferred to the Tribunal in the matter by,—

(a) an issuer aggrieved by the decision of the stock exchange to refuse

to list the securities of such company under sub-section (4) of section 64; or

(b) an issuer or an investor aggrieved by the decision of the stock

exchange delisting the securities under sub-section (2) of section 66.

(3) Every appeal under sub-sections (1) and (2) shall be filed within a period

of forty-five days from the date on which a copy of the order made by the Board,

Insurance Regulatory and Development Authority of India, the Pension Fund

Regulatory and Development Authority, the International Financial Services

Centres

Authority,

Ombudsperson,

adjudicating

officer,

self-regulatory

organisation or market infrastructure institution, as the case may be, is received by

the person aggrieved and shall be in such form, manner and be accompanied by such

fee as may be prescribed:

Provided that the Tribunal may entertain an appeal after the expiry of the said

period of forty-five days if it is satisfied that there was sufficient cause for not filing

it within that period.

(4) On receipt of an appeal under sub-sections (1) and (2), the Tribunal may,

after giving the parties to the appeal an opportunity of being heard, pass such orders

thereon as it thinks fit, confirming, modifying or setting aside the order, decision or

directions appealed against and provide a copy of such order free of cost to the

parties.

(5) The Tribunal may, under sub-section (4), grant permission for listing of

securities and a stock exchange shall act in conformity with the order of the

Tribunal.

(6) The appeal filed under sub-sections (1) and (2) shall be dealt expeditiously

and preferably be disposed of within a period of six months from the date of receipt

of the appeal.

Appeal to

Tribunal.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Procedure and

powers of

Tribunal.

Order

constituting

Tribunal to be

final and not to

invalidate its

proceedings.

Right to legal

representation.

86. (1) The Tribunal shall not be bound by the procedure laid down by the

Code of Civil Procedure, 1908, but shall be guided by the principles of natural

justice and, subject to the provisions of this Code and the rules made thereunder,

shall have the powers to regulate its own procedure.

(2) The Tribunal shall have the same powers as are vested in a civil court under

the Code of Civil Procedure, 1908, while trying a suit in respect of the following

matters, namely:—

(a) summoning and enforcing the attendance of any person and

examining him on oath;

(b) requiring the discovery and production of documents;

(d) issuing commissions for the examination of witnesses or documents;

(e) reviewing its decisions;

(f) dismissing an application for default or deciding it ex parte;

(g) setting aside any order of dismissal of any application for default or

any order passed by it ex parte; and

(h) any other matter which may be prescribed.

(3) Every proceeding before the Tribunal shall be deemed to be a judicial

proceeding within the meaning of sections 229 and 267, and for the purposes of

section 233 of the Bharatiya Nyaya Sanhita, 2023 and the Tribunal shall be deemed

to be a civil court for all the purposes of section 215 and Chapter XXVIII of the

Bharatiya Nagarik Suraksha Sanhita, 2023.

(4) The Presiding Officer of the Tribunal may, from time to time make

provisions for the distribution of the business of the Tribunal amongst the Benches

thereof.

(5) On the application of any of the parties, the Presiding Officer may, after

notice to the parties concerned, and after hearing such of them as he may deem fit,

or on his own motion without such notice, transfer any case pending before one

Bench to any other Bench.

(6) If the Members of a Bench of the Tribunal differs in opinion on any point,

such point shall be decided according to the opinion of the majority, if there is a

majority, but if the Members are equally divided, they shall state the point or points

on which they differ and make a reference of such points to the Presiding Officer of

the Tribunal who shall either hear the same himself or refer the case for hearing on

such points by one or more of the other Members of the Tribunal and such point or

points shall be decided by the majority of the Members of the Tribunal who have

heard the case including those who first heard it.

87. No order of the Central Government appointing any person as the

Presiding Officer or a Member of the Tribunal shall be called in question in any

manner, and no act or proceeding before the Tribunal shall be called in question in

any manner on the ground merely of any vacancy or defect in the constitution of the

Tribunal, as the case may be.

88. A party may either appear in person or authorise one or more chartered

accountants or company secretaries or cost accountants or advocates or any of its

officers to present his case before the Tribunal.

Explanation.–– For the purposes of this section, the expressions—

(a) “advocate” shall have the same meaning as assigned to it in

clause (a) of sub-section (1) of section 2 of the Advocates Act, 1961;

5 of 1908.

45 of 2023.

46 of 2023.

25 of 1961.

THE GAZETTE OF INDIA EXTRAORDINARY

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38 of 1949.

56 of 1980.

23 of 1959.

36 of 1963.

45 of 2023.

(b) “chartered accountant” shall have the same meaning as assigned to it

in clause (b) of sub-section (1) of section 2 of the Chartered Accountants

Act, 1949;

in clause (c) of sub-section (1) of section 2 of the Company Secretaries

Act, 1980;

(d) “cost accountant” shall have the same meaning as assigned to it in

clause (b) of sub-section (1) of section 2 of the Cost Accountants Act, 1959.

89. The provisions of the Limitation Act, 1963, shall, as far as may be, apply

to an appeal made to the Tribunal.

90. The Presiding Officer, Members and other officers and employees of the

Tribunal shall be deemed to be public servants within the meaning of clause (28) of

section 2 of the Bharatiya Nyaya Sanhita, 2023.

91. Any person aggrieved by any decision or order of the Tribunal may file an

appeal to the Supreme Court, within a period of sixty days from the date of

communication of the decision or order of the Tribunal to him on any question of

law arising out of such order:

Provided that the Supreme Court may, if it is satisfied that the appellant was

prevented by sufficient cause from filing the appeal within the said period, allow it

to be filed within a further period not exceeding sixty days.

CHAPTER XII

PROHIBITION OF FRAUDULENT OR UNFAIR PRACTICES AND MARKET ABUSE

92. No person shall directly or indirectly commit any of the following

fraudulent or unfair practices,—

(a) use or employ, in connection with the issue, purchase, sale of or any

dealings in securities listed or proposed to be listed on a stock exchange, any

manipulative or deceptive device or contrivance in contravention of the

provisions of this Code or the rules or regulations or bye-laws made thereunder;

(b) employ any device, scheme or artifice to defraud in connection with

the issue or dealing in securities which are listed or proposed to be listed on a

stock exchange;

would operate as fraud or deceit upon any person, in connection with the issue

or dealing in securities which are listed or proposed to be listed on a stock

exchange, in contravention of the provisions of this Code or the rules or

regulations or bye-laws made thereunder;

(d) acquire control of any company or securities more than the specified

percentage of equity share capital of a company whose securities are listed or

proposed to be listed on a stock exchange in contravention of the regulations

made under this Code;

(e) make any false or fraudulent entry in any record or any material and wilful

omission of any statement in the record, to be prepared or submitted under the

provisions of this Code or the rules or regulations or bye-laws made thereunder;

(f) engage in such other fraudulent or unfair practices in the securities

markets as may be specified by regulations.

Limitation.

Presiding

Officer,

Members and

staff of Tribunal

to be public

servants.

Appeal to

Supreme Court.

Prohibition of

fraudulent or

unfair practices.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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Prohibition of

market abuse.

Punishment for

failure to comply

orders.

Punishment for

failure to comply

with directions

of Investigating

Officer.

93. No person shall directly or indirectly commit any of the following acts of

market abuse, namely:––

(a) engage in insider trading;

(b) use or employ any device, scheme or artifice to defraud the investors

in the securities markets;

information or communicating such material or non-public information to any

other person, in a manner which is in contravention of the provisions of this

Code or the rules or regulations or bye-laws made thereunder;

(d) publish or cause to publish or report or cause to report by a person

dealing in securities, any false or misleading information relating to securities

with the intent of artificially inflating, depressing, maintaining or causing

fluctuation in the price of, supply of or demand for such securities, or creating

a false or misleading impression as to the price of, supply of or demand for

such securities;

(e) use its position to inflate, depress, maintain or cause fluctuation in

the price of, supply of or demand for securities, or create a false or misleading

impression as to the price of, supply of or demand for securities;

(f) place any order in securities, while directly or indirectly in possession

of information which is not publicly available, regarding a substantial

impending transaction in securities, its underlying or its derivative; or

(g) engage in such other activities as may be specified by regulations

which adversely affects the integrity of the securities markets.

CHAPTER XIII

OFFENCES AND PENALTIES

94. Without prejudice to the imposition of any penalty under this Chapter,

where any person—

(a) fails to comply with an interim order made under sub-section (2) of

section 27; or

(b) fails to comply with the final order made under section 20,

he shall be punishable with imprisonment for a term which shall not be less than

one month but may extend to ten years, or with fine which shall not be less than ten

lakh rupees, but may extend to twenty-five crore rupees, or with both.

95. Without prejudice to the imposition of any penalty under this Chapter, if

any person fails without reasonable cause or refuses—

(a) to preserve and produce any book of accounts, registers, records,

information and other documents;

(b) to furnish such statement or undertaking or certificate;

(d) to appear personally and take oath before the Investigating Officer

and answer any question put to him during such appearance;

(e) to sign the record of examination,

under sub-sections (1) and (2) of section 14, he shall be punishable with

imprisonment for a term which may extend to one year or with fine which shall not

be less than ten lakh rupees, but may extend to one crore rupees and also with a

further fine which may extend to five lakh rupees for each day after the first day

during which the failure or refusal continues, or with both.

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96. Without prejudice to the imposition of any penalty under this Chapter,

where any person commits or attempts to commit or abets the commission of market

abuse, he shall be punishable with imprisonment for a term which may extend to ten

years or with fine which shall not be less than ten lakh rupees, but may extend to

twenty-five crore rupees, or with both.

97. If any person––

(a) fails to obtain certificate of registration and sponsors or carries on

the activity in the securities markets without such certificate;

(b) fails to comply with the terms and conditions of certificate of

registration;

of an account with a securities markets service provider;

(d) fails to make an application for listing of its schemes as specified in

the regulations;

(e) fails to refund the application money paid by investors within the

period specified in the regulations;

(f) fails to despatch, submit or credit any unit certificates or securities to

any investor as specified in the regulations;

(g) fails to furnish or file any information, document, books, returns or

report within the period specified therefor in the regulations, to the Board or

to a stock exchange, as the case may be;

(h) fails to furnish or files false, incorrect or incomplete information,

documents, books, return or any report;

(i) fails to maintain books of account or records;

(j) fails to enter into an agreement with its client;

(k) fails without reasonable cause or refuses to produce any record in its

custody or power;

(l) fails to comply with the regulations made by the Board or bye-laws

of a market infrastructure institution,

he shall be liable to a penalty specified as under,––

(i) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than one lakh rupees but may extend to three times the amount of such

unlawful gain or loss, whichever is higher;

(ii) if the default does not result in unlawful gain or loss, or such unlawful

gain or loss is not quantifiable for reasons to be recorded in writing, a penalty

which shall not be less than one lakh rupees but may extend to one lakh rupees

for each day of such default, subject to a maximum of ten crore rupees.

98. If any securities markets service provider—

(a) fails to invest money collected by it in the manner or within the

period as specified by regulations;

(b) fails to comply with any of the provisions of this Code, the rules or

the regulations made thereunder, or directions issued by the Board or the

bye-laws of a market infrastructure institution,

it shall be liable to a penalty specified as under,––

Punishment for

market abuse.

Penalty for

failure to do

certain acts.

Penalty for

default by

securities

markets service

provider.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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Penalty for

default by stock

broker.

Penalty for

failure to redress

grievances of

investors.

Penalty for

failure to

dematerialise

certificate of

securities.

(i) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than one lakh rupees but may extend to three times the amount of such

unlawful gain or loss, whichever is higher;

(ii) if the default does not result in unlawful gain or loss, or such unlawful

gain or loss is not quantifiable for reasons to be recorded in writing, a penalty

which shall not be less than one lakh rupees but may extend to one lakh rupees

for each day of such default, subject to a maximum of ten crore rupees.

99. If any stock broker––

(a) fails to issue contract notes in the form and manner specified by the

stock exchange of which such broker is a member;

(b) fails to deliver any security or fails to make payment of the amount

due to the investor in the manner and within the period as specified by

regulations;

the securities or money of a client or clients for self or for any other client; or

(d) charges an amount of brokerage which is in excess of the brokerage

as specified by regulations,

he shall be liable to a penalty specified as under,––

(i) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than one lakh rupees but may extend to three times the amount of such

unlawful gain or loss, whichever is higher;

(ii) if the default does not result in unlawful gain or loss, or such unlawful

gain or loss is not quantifiable for reasons to be recorded in writing, a penalty

which shall not be less than one lakh rupees but may extend to one lakh rupees

for each day of such default, subject to a maximum of ten crore rupees.

100. If any securities markets service provider or any issuer or its agent after

being called upon by the Board in writing including by electronic means, to redress

the grievances of investors, fails to redress such grievances within the period and

manner as specified by regulations, it shall be liable to a penalty specified as

under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than one lakh rupees but may extend to three times the amount of such

unlawful gain or loss, whichever is higher;

(b) if the default does not result in unlawful gain or loss, or such unlawful

gain or loss is not quantifiable for reasons to be recorded in writing, a penalty

which shall not be less than one lakh rupees but may extend to one lakh rupees

for each day of such default, subject to a maximum of ten crore rupees.

101. If any issuer or its agent or any intermediary, fails to dematerialise the

certificate of securities, within such time period as specified by regulations or

bye-laws or delays the process of dematerialisation of securities, it shall be liable to

a penalty specified as under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than one lakh rupees but may extend to three times the amount of such

unlawful gain or loss, whichever is higher;

THE GAZETTE OF INDIA EXTRAORDINARY

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(b) if the default does not result in unlawful gain or loss, or such unlawful

gain or loss is not quantifiable for reasons to be recorded in writing, a penalty

which shall not be less than one lakh rupees but may extend to one lakh rupees

for each day of such default, subject to a maximum of ten crore rupees.

102. If any depository or intermediary or any depository participant or its

agent or any issuer, fails to reconcile the records of dematerialised securities with

all the securities issued by the issuer as specified by regulations, it shall be liable to

a penalty specified as under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than one lakh rupees but may extend to three times the amount of such

unlawful gain or loss, whichever is higher;

(b) if the default does not result in unlawful gain or loss, or such unlawful

gain or loss is not quantifiable for reasons to be recorded in writing, a penalty

which shall not be less than one lakh rupees but may extend to one lakh rupees

for each day of such default, subject to a maximum of ten crore rupees.

103. If any person,––

(a) fails to––

(i) disclose the aggregate of its shareholding in the body corporate

before it acquires any shares of that body corporate;

(ii) make a public announcement to acquire shares at a minimum

price;

(iii) make a public offer by sending letter of offer to the

shareholders of the concerned company;

(iv) make payment of consideration to the shareholders who sold

their shares pursuant to letter of offer;

(v) comply with the final order under section 20;

(vi) comply with an interim order under section 27;

(vii) comply with the provisions of section 52;

(viii) comply with the provisions of section 58; or

(ix) comply with the orders of the Tribunal under section 85;

(b) without possessing a certificate of registration, represents, behaves,

or otherwise holds itself out, in a manner which indicates that it possesses the

same;

exchange to be used for performance of contracts to be recorded or adjusted

or rights or liabilities arising out of such contracts in any manner whatsoever,

in contravention of the provisions of this Code;

(d) being a member of a stock exchange, settles any transaction of its

clients inter se with another member or members, without executing such

transactions through the stock exchange mechanism;

(e) not being a member of a stock exchange or its agent authorised as

such under the bye-laws of such stock exchange,––

Penalty for

failure to

reconcile

records.

Penalty for other

non-compliance

of certain

provisions.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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(i) wilfully represents to or induces any person to believe that

contracts can be entered into or performed under this Code through him;

(ii) canvasses, advertises or touts in any manner either for himself or

on behalf of any other persons for any business connected with contracts;

(f) joins, gathers or assists in gathering any person or persons for making

bids or offers or for entering into or performing any contracts at any place

other than the place of business specified in the bye-laws of a stock exchange;

(g) enters into any contract in contravention of section 45;

(h) enters into any contract in contravention of section 46;

(i) deals with securities in contravention of section 64;

(j) deals with securities in contravention of section 66;

(k) knowingly alters, conceals, mutilates, destroys or makes a false entry

in any information, record (including electronic records), document or any

tangible object, so as to impede, obstruct, or influence the examination,

inquiry, investigation, audit, inspection, adjudication and a person shall be

deemed to have altered, concealed, mutilated, destroyed or falsified such

information, record or document if he fails to immediately report the matter to

the Board or fails to preserve the same till such information continues to be

relevant to any examination, inquiry, inspection, investigation, audit or

adjudication, which may be initiated by the Board;

(l) without being authorised to do so,––

(i) access or tries to access, or denies access or modifies access

parameters, to the regulatory data in the database;

(ii) downloads, extracts, copies, or reproduces in any form, the

regulatory data maintained in the system database;

(iii) knowingly introduces any computer virus or other computer

contaminant into the system database and brings out a trading halt;

(iv) disrupts the functioning of system database;

(v) knowingly damages, destroys, deletes, alters, diminishes in

value or utility, or affects by any means, the regulatory data in the system

database; or

(vi) knowingly provides any assistance to or causes any other

person to do any of the acts specified in sub-clauses (i) to (v).

Explanation.—For the purposes of clause (l), the expressions “computer

contaminant”, “computer virus” and “damage” shall have the same meanings

respectively assigned to them in section 43 of the Information Technology

Act, 2000;

(m) indulges in any fraudulent or unfair practices under section 92;

(n) commits market abuse under section 93;

(o) misuses or makes unauthorised usage of the accounts maintained

with the depository,

he shall be liable to a penalty specified as under,––

21 of 2000.

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(i) if the default or contravention results in unlawful gain or causes loss

to an investor or other persons and such gain or loss is quantifiable, a penalty

which shall not be less than ten lakh rupees, but may extend to three times the

amount of such unlawful gain or loss made by such person as a result of the

default or contravention, whichever is higher:

Provided that where the higher limit of the penalty as quantified by the

adjudicating officer under this clause, is less than one hundred crore rupees,

he may, for reasons to be recorded in writing, impose a penalty which may

extend to one hundred crore rupees, if sufficient cause exists;

(ii) if the default or contravention does not result in unlawful gain or loss

to the person concerned, or such unlawful gain or loss is not quantifiable for

reasons to be recorded in writing, a penalty which shall not be less than ten

lakh rupees, but may extend to one hundred crore rupees.

104. If any market infrastructure institution fails to conduct its business with

its members or any issuer or its agent or any person associated with the securities

markets in accordance with the provisions of this Code or the rules or regulations

made thereunder, it shall be liable to a penalty specified as under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than ten lakh rupees, but may extend to three times the amount of such

unlawful gain or loss made by such person as a result of the default, whichever

is higher:

Provided that where the higher limit of the penalty as quantified by the

adjudicating officer under this clause, is less than one hundred crore rupees,

he may, for reasons to be recorded in writing, impose a penalty which may

extend to one hundred crore rupees, if sufficient cause exists;

(b) if the default does not result in unlawful gain or loss to the person

concerned, or such unlawful gain or loss is not quantifiable for reasons to be

recorded in writing, a penalty which shall not be less than ten lakh rupees, but

may extend to one hundred crore rupees.

105. If any market infrastructure institution or any self-regulatory organisation

fails or neglects to furnish periodical returns or furnishes false, incorrect or

incomplete periodical returns or fails or neglects to make or amend its bye-laws as

directed by the Board or fails to comply with directions issued by the Board or the

adjudicating officer, it shall be liable to a penalty specified as under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than ten lakh rupees, but may extend to three times the amount of such

unlawful gain or loss made by such person as a result of the default, whichever

is higher:

Provided that where the higher limit of the penalty as quantified by the

adjudicating officer under this clause, is less than one hundred crore rupees,

he may, for reasons to be recorded in writing, impose a penalty which may

extend to one hundred crore rupees, if sufficient cause exists;

(b) if the default does not result in unlawful gain or loss to the person

concerned, or such unlawful gain or loss is not quantifiable for reasons to be

recorded in writing, a penalty which shall not be less than ten lakh rupees, but

may extend to one hundred crore rupees.

Penalty for

failure to

conduct business

in accordance

with provisions

of Code.

Penalty for

failure to furnish

periodical

returns, etc.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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Penalty for

failure to comply

with orders of

Ombudsperson.

Penalty for

default by

person managing

pooled

investment

vehicle.

Penalty for

excess

dematerialisation

or delivery of

unlisted

securities.

106. If any securities markets service provider or any issuer or its agent fails

to comply with the order made by the Ombudsperson under sub-section (1) of

section 75, it shall be liable to a penalty specified as under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than ten lakh rupees, but may extend to three times the amount of such

unlawful gain or loss made by such person as a result of the default, whichever

is higher:

Provided that where the higher limit of the penalty as quantified by the

adjudicating officer under this clause, is less than one hundred crore rupees,

he may, for reasons to be recorded in writing, impose a penalty which may

extend to one hundred crore rupees, if sufficient cause exists;

(b) if the default does not result in unlawful gain or loss to the person

concerned, or such unlawful gain or loss is not quantifiable for reasons to be

recorded in writing, a penalty which shall not be less than ten lakh rupees, but

may extend to one hundred crore rupees.

107. If a person managing a pooled investment vehicle––

(a) fails to comply with the conditions specified in the listing agreement,

listing or delisting conditions or commits a breach thereof;

(b) manipulates the books or financial statements or siphons of public

issue proceeds of such entity,

he shall be liable to a penalty specified as under––

(i) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than ten lakh rupees, but may extend to three times the amount of such

unlawful gain or loss made by such person as a result of the default, whichever

is higher:

Provided that where the higher limit of the penalty as quantified by the

adjudicating officer under this clause, is less than one hundred crore rupees,

he may, for reasons to be recorded in writing, impose a penalty which may

extend to one hundred crore rupees, if sufficient cause exists;

(ii) if the default does not result in unlawful gain or loss to the person

concerned, or such unlawful gain or loss is not quantifiable for reasons to be

recorded in writing, a penalty which shall not be less than ten lakh rupees, but

may extend to one hundred crore rupees.

108. An issuer who dematerialises securities more than the issued securities

of a company or delivers in the stock exchange the securities which are not listed on

the stock exchange or delivers securities where no trading permission has been given

by the stock exchange, it shall be liable to a penalty specified as under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than ten lakh rupees, but may extend to three times the amount of such

unlawful gain or loss made by such person as a result of the default, whichever

is higher:

Provided that where the higher limit of the penalty as quantified by the

adjudicating officer under this clause, is less than one hundred crore rupees,

he may, for reasons to be recorded in writing, impose a penalty which may

extend to one hundred crore rupees, if sufficient cause exists;

THE GAZETTE OF INDIA EXTRAORDINARY

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18 of 2013.

(b) if the default does not result in unlawful gain or loss to the person

concerned, or such unlawful gain or loss is not quantifiable for reasons to be

recorded in writing, a penalty which shall not be less than ten lakh rupees, but

may extend to one hundred crore rupees.

109. If any person contravenes any of the provisions of this Code or the rules

or regulations made thereunder for which no penalty or punishment is provided in

this Code, such person shall be liable to a penalty specified as under,––

(a) if the default results in unlawful gain or causes loss to an investor or

other persons and such gain or loss is quantifiable, a penalty which shall not

be less than one lakh rupees but may extend to three times the amount of such

unlawful gain or loss, whichever is higher;

(b) if the default does not result in unlawful gain or loss, or such unlawful

gain or loss is not quantifiable for reasons to be recorded in writing, a penalty

which shall not be less than one lakh rupees but may extend to one lakh rupees

for each day of such default, subject to a maximum of ten crore rupees.

110. (1) Where a company contravenes the provisions of this Code or the rules

or regulations or orders made thereunder, every officer who, at the time when the

contravention was committed, was in-charge of, and was responsible to the

company for the conduct of the business of the company, as well as the company,

shall be deemed to be guilty of the contravention and shall be liable to be proceeded

against accordingly:

Provided that nothing contained in this section shall render any such person

liable for the contravention, if he proves that the contravention was committed

without his knowledge or that he had exercised all due diligence to prevent the

commission of such contravention.

(2) Notwithstanding anything contained in this section—

(a) an independent director;

(b) a non-executive director not being a promoter or a key managerial

personnel,

shall be held liable in respect of such acts of omission or commission by a company

which had occurred with his knowledge, attributable through the process of the

Board of Directors, and with his consent or connivance or where he had not acted

diligently.

(3) Where a contravention has been committed by a company and it is proved

that the contravention has been committed with the consent or connivance of, or is

attributable to any neglect on the part of, any officer of the company, by whatever

name called, such officer shall also be deemed to be guilty of the contravention and

shall be liable to be proceeded against accordingly.

Explanation.––For the purposes of this section, the expressions—

(a) “company” means any body corporate and includes a firm or other

association of individuals;

(b) “officer”, in relation to a—

(i) company, means an officer as defined in clause (59) of

section 2 of the Companies Act, 2013;

(ii) limited liability partnership or that of any other firm, shall

mean a partner and employee of that firm;

Penalty where

no specific

provision for

penalty is

provided.

Contravention

by companies.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Factors to be

considered by

adjudicating

officer for

imposition of

penalty.

Penalty to be

credited to

Consolidated

Fund of India.

Establishment of

Special Courts.

Appeal and

revision.

(iii) any other body corporate or association of individuals shall

mean any manager, secretary or any other employee by whatever name

called.

111. In addition to the factors specified under section 19, the adjudicating

officer may also consider the following factors while imposing the penalty under

sections 97 to 109,—

(a) the amount required to be disgorged under section 25; and

(b) any aggravating and mitigating circumstances.

112. All sums realised by way of penalty by the Board under this Code shall

be credited to the Consolidated Fund of India in such manner as may be prescribed.

CHAPTER XIV

SPECIAL COURTS

113. (1) For the purposes of providing speedy trial of offences under

this Code, the Central Government may by notification, with the concurrence

of the Chief Justice of the High Court concerned, for such area or areas as may be

specified therein, establish or designate as many Special Courts as may be

necessary:

Provided that any notification issued under section 26A of the Securities

Contracts (Regulation) Act, 1956, section 26A of the Securities and Exchange

Board of India Act, 1992, and section 22C of the Depositories Act, 1996,

establishing or designating Special Courts and in force immediately before the date

of commencement of this Code shall, on such commencement, be deemed to have

been issued under this section and shall continue to have the same force and effect

after such commencement until it is amended, rescinded or superseded under the

provisions of this section.

(2) A Special Court shall consist of a single judge and he shall not be

qualified for appointment as such, unless he immediately before such appointment,

holds the office of a Sessions Judge or an Additional Sessions Judge, as the case

may be.

(3) When trying an offence under this Code, a Special Court may also try an

offence other than an offence under this Code with which the accused may, under

the Bharatiya Nagarik Suraksha Sanhita, 2023, be charged at the same trial.

(4) Notwithstanding anything contained in the Bharatiya Nagarik Suraksha

Sanhita, 2023, any offence committed under this Code and triable by a Special Court

shall, until a Special Court is established or designated, be tried by a Court of

Session exercising jurisdiction over the area:

Provided that nothing contained in this sub-section shall affect the powers of

the High Court under section 447 of the Bharatiya Nagarik Suraksha Sanhita, 2023

to transfer any case or class of cases of which cognizance has been taken by a Court

of Session under this section.

(5) Where any proceedings under sub-section (4) is pending before a Court of

Session, such proceedings shall be transferred, heard and disposed of by a Special

Court on being established or designated under this Code.

114. The High Court may exercise, so far as may be applicable, all the powers

conferred by Chapters XXXI and XXXII of the Bharatiya Nagarik Suraksha

Sanhita, 2023 on a High Court, as if a Special Court within the local limits of the

jurisdiction of the High Court were a Court of Session trying cases within the local

limits of the jurisdiction of the High Court.

42 of 1956.

15 of 1992.

22 of 1996.

46 of 2023.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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46 of 2023.

115. (1) Save as otherwise provided in this Code, the provisions

of the Bharatiya Nagarik Suraksha Sanhita, 2023 shall apply to the

proceedings before a Special Court and for the purposes of the said provisions,

the Special Court shall be deemed to be a Court of Session and the person

conducting prosecution before a Special Court shall be deemed to be a Public

Prosecutor within the meaning of clause (v) of section 2 of the Bharatiya Nagarik

Suraksha Sanhita, 2023.

(2) The person conducting prosecution referred to in sub-section (1)

should have been in practice as an advocate for not less than seven years or

should have held a post, for a period of not less than seven years, under

the Central Government or a State Government, requiring special

knowledge of law.

(3) Notwithstanding anything contained in the Bharatiya Nagarik Suraksha

Sanhita, 2023, the Special Court shall take cognizance of an offence without the

accused being committed to it for trial and in trying the offence, the Special

Court shall hold trial in accordance with the provisions of the Bharatiya Nagarik

Suraksha Sanhita, 2023 as it applies to a trial before a Court of Session.

116. No court shall take cognizance of any offence punishable under this

Code, except on a complaint made in writing by the Board, or an officer or a

person authorised by it in this behalf.

117. (1) Notwithstanding anything contained in the Bharatiya Nagarik

Suraksha Sanhita, 2023, any offence punishable under this Code, not being an

offence punishable with imprisonment only, or with imprisonment and with fine,

may either before or after the institution of any proceeding, be compounded by,

the Tribunal on such terms and conditions and on payment of such sum as may

be prescribed, or a court before which such proceedings are pending:

Provided that any offence punishable under this Code shall not

be compounded, if the investigation against such person is pending under

this Code.

(2) Nothing in sub-section (1) shall apply to an offence committed by a

person within a period of three years from the date on which a similar offence

committed by it was compounded under this section.

Explanation.––For the purposes of this sub-section, any subsequent

offence committed after the expiry of a period of three years from the date on

which the offence was previously compounded, shall be deemed to be a first

offence.

(3) The Tribunal or the court, as the case may be, shall not decide an

application under sub-section (1), unless the Board has been given an

opportunity of being heard in the matter.

(4) If any person fails to comply with the decision of the Tribunal or the

court, as the case may be, the maximum amount of fine for the offence proposed

to be compounded shall be twice the amount provided in the corresponding

provisions in which punishment for such offence is provided.

(5) Where the compounding of any offence is made by the Tribunal after

the institution of any proceedings before the court, such compounding shall be

brought to the notice of such court in which the proceeding is pending and on

such notice of the compounding of the offence being given, the person in relation

to whom the offence is so compounded shall be discharged.

Application of

Bharatiya

Nagarik

Suraksha

Sanhita to

proceedings

before Special

Court.

Cognizance of

offences by

court.

Compounding of

certain offences.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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Issuance or

holding of other

regulated

instrument.

Listing and

trading of other

regulated

instrument.

Cooperation

between Board

and other

regulatory

authority.

General

conditions for

Board and other

regulatory

authority.

Board to take

action against

entity registered

with other

regulatory

authority.

CHAPTER XV

INTER-REGULATORY COORDINATION

118. (1) The other regulated instrument may be issued through or be held in a

depository, under the provisions of any other law for the time being in force or any

order or direction issued by other regulatory authority.

(2) The Board may, in consultation with the other regulatory authority provide

the conditions and procedures relating to the issuance and holding of other regulated

instrument through depositories as may be specified by regulations.

119. (1) The Board may permit any other regulated instrument to be listed on

a stock exchange, if the listing of such other regulated instrument is permitted by

other regulatory authority.

(2) The other regulated instrument which is listed on a stock exchange shall

be listed, traded, cleared and settled in accordance with the provisions of this Code

and shall be subject to such other conditions as may be specified by regulations in

consultation with the other regulatory authority.

(3) Where the other regulated instrument has been permitted to be listed on a

stock exchange, the Board and the other regulatory authority may implement such

other measures as may be necessary or expedient to facilitate—

(a) interoperability of any platform for the holding or transfer of such

other regulated instrument under its jurisdiction with any market infrastructure

institution;

(b) its transfer from other platform under the jurisdiction of other

regulatory authority to any market infrastructure institution, or vice-versa; and

120. The Board may enter into a memorandum of understanding with any

other regulatory authority for the purpose of any matter, including the issuance,

holding, listing or trading of any other regulated instrument through any market

infrastructure institution and sharing of information thereto and on the inter se

responsibilities between the Board and other regulatory authority.

121. The Board and the other regulatory authority while exercising their

powers and performing their duties under this Chapter shall—

(a) facilitate investor participation in other regulated instrument, ensure

investor protection and promote the orderly development of securities

markets;

(b) consult and coordinate to ensure and achieve harmonisation of

regulatory action in respect of any other regulated instrument; and

listing, trading and settlement of other regulated instrument in a timely

manner.

122. (1) Where a person registered with the other regulatory authority

contravenes any provisions of this Code or the rules or regulations or bye-laws made

thereunder, the Board may either on its own motion or upon a reference being made

by such other regulatory authority, initiate appropriate proceedings against such

person and shall inform such other regulatory authority.

(2) Where the Board is of the opinion that the person referred to in

sub-section (1) has contravened the provisions of the law under which it is

registered, including any rules or regulations or bye-laws made thereunder, it shall

inform the other regulatory authority concerned about such contravention for

necessary action in accordance with such law.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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15 of 1992.

CHAPTER XVI

FINANCE, ACCOUNTS AND AUDIT

123. The Central Government may, after due appropriation made by the

Parliament by law in this behalf, make grants to the Board of such sums of money

as the Central Government may think appropriate for the purposes of this Code.

124. (1) The Securities and Exchange Board of India General Fund established

under section 14 of the Securities and Exchange Board of India Act, 1992, shall be

deemed to be the Fund for the purposes of this Code and there shall be credited

thereto,—

(a) all grants, fees and charges received by the Board under this Code;

(b) all sums received by the Board as costs pursuant to an order of a court

or Tribunal, as the case may be; and

decided upon by the Central Government.

(2) The Fund shall be applied to meet—

(a) the salaries, allowances and other remuneration of the Members,

officers and other employees of the Board;

(b) the expenses of the Board in the discharge of its functions under

section 11;

(d) the capital expenditure, in accordance with the annual capital

expenditure plan approved by the Board.

(3) The Board shall constitute a reserve fund and twenty-five per cent. of the

annual surplus of the General Fund in any financial year shall be credited to such

reserve fund which shall not exceed the total of annual expenditure of the preceding

two financial years.

Explanation.––For the purposes of this sub-section, annual surplus means the

sum credited to the General Fund in a financial year under sub-section (1) in excess

of the sum applied in that financial year for the purposes specified in

sub-section (2).

(4) The sum credited to the reserve fund shall be utilised for the purposes of

meeting the expenses of the Board in the discharge of its functions, as may be

decided by the Board.

(5) After crediting the portion of the annual surplus under sub-section (3), the

remaining annual surplus of the General Fund for that financial year shall be

credited to the Consolidated Fund of India.

125. (1) The Investor Protection and Education Fund established under the

Securities and Exchange Board of India (Investor Protection and Education Fund)

Regulations, 2009 shall be deemed to be the Investor Protection and Education Fund

for the purposes of this Code and there shall be credited thereto,––

(a) contribution as may be made by the Board to the Investor Protection

and Education Fund;

(b) grants and donations to the Investor Protection and Education Fund

by the Central Government, State Governments, or such other persons as may

be specified by regulations;

Grants by

Central

Government.

Fund.

Investor

Protection and

Education Fund.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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_______________________________________________________________

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_______________________________________________________________

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Accounts and

audit.

Returns and

reports.

Regulatory

sandbox.

(d) interest or other income received out of any investments made from

the Investor Protection and Education Fund; and

(e) such other funds as may be decided by the Board.

(2) The Investor Protection and Education Fund shall be administered and

utilised by the Board in such manner as may be specified by regulations for the

promotion of education, awareness and protection of investors:

Provided that the disgorged amounts credited under clause (c) of

sub-section (1) and any interest accrued thereto as credited to the Investor Protection

and Education Fund, shall be first utilised by the Board for the purpose of making

restitution under sub-section (2) of section 25, and thereafter, any remaining amount

shall be utilised in accordance with this sub-section.

126. (1) The Board shall maintain proper accounts and other relevant records,

and prepare an annual statement of accounts along with the accounts of the Investor

Protection and Education Fund, in such form as may be prescribed in consultation

with the Comptroller and Auditor-General of India.

(2) The accounts referred to in sub-section (1) shall be audited by the

Comptroller and Auditor-General of India at such intervals as may be specified by

him and any expenditure incurred in connection with such audit shall be payable by

the Board to the Comptroller and Auditor-General of India.

(3) The Comptroller and Auditor-General of India and any other person

appointed by him in connection with the audit of the accounts of the Board shall

have the same rights, privileges and authority in connection with such audit as the

Comptroller and Auditor-General of India generally has in connection with the audit

of the Government accounts and, in particular, shall have the right to demand the

production of books, accounts, connected vouchers and other documents and papers

and to inspect any of the offices of the Board.

(4) The accounts referred to in sub-section (1) as certified by the Comptroller

and Auditor-General of India or any other person appointed by him in this behalf,

together with the audit report thereon, shall be forwarded annually to the Central

Government, who shall cause the same to be laid before each House of Parliament.

127. (1) The Board shall furnish to the Central Government, at such time and

in such form and manner, as may be prescribed, or as the Central Government may

direct, such returns and statements and such particulars in regard to any proposed or

existing programme for the promotion and development of the securities markets,

as the Central Government may require, from time to time.

(2) Without prejudice to the provisions of sub-section (1), the Board shall,

after the end of each financial year within a period of ninety days, submit to the

Central Government a report in such form, as may be prescribed, giving a true and

full account of its activities, policies and programmes during the previous financial

year.

(3) A copy of the report received under sub-section (2) shall be laid, as soon

as may be after it is received, before each House of Parliament.

CHAPTER XVII

MISCELLANEOUS

128. (1) The Board may establish a regulatory sandbox for the development

of a new product, contract or service in the securities markets along with any

exemptions or modifications, on its own motion or on an application made by any

person, in such manner as may be specified by regulations.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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______

_______________________________________________________________

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45 of 2023.

(2) If a product, contract or service referred to in sub-section (1) falls within

the jurisdiction of one or more other regulatory authority, any exemption given or

modification made, shall be in consultation with such regulatory authority.

(3) The Board shall, while establishing a regulatory sandbox,––

(a) consider the impact of the proposed product, contract or service on

the systemic stability of the securities markets, amongst other factors;

(b) ensure that there are adequate safeguards to protect the interests of

the investors and recipients of the services; and

application for participation in the regulatory sandbox.

129. (1) The National Institute of Securities Markets, a public trust established

by the Board shall be deemed to have been established under this Code.

(2) The Board shall regulate the National Institute of Securities Markets for

capacity building of intermediaries.

130. All Members, officers and other employees of the Board shall be deemed,

when acting or purporting to act in pursuance of any of the provisions of this Code,

to be public servants within the meaning of clause (28) of section 2 of the Bharatiya

Nyaya Sanhita, 2023.

131. (1) Without prejudice to the foregoing provisions of this Code, the Board

shall, in exercise of its powers or the performance of its duties under this Code, be

bound by such directions on questions of policy as the Central Government may

give in writing to it, from time to time:

Provided that the Board shall, as far as practicable, be given an opportunity to

express its views before any direction is given under this sub-section.

(2) The decision of the Central Government whether a question is one of

policy or not shall be final.

132. The Board may, by general or special order in writing, delegate to any

Member, officer of the Board or any other person subject to such conditions, if any, as

may be specified in the order, such of its powers and functions under this Code, except

the powers exercisable under sections 128, 146 and 149, as it may deem necessary.

133. (1) If at any time the Central Government is of the opinion that—

(a) on account of grave emergency, the Board is unable to discharge the

functions and duties imposed on it, by or under this Code; or

(b) the Board has persistently made default in complying with any

directions issued by the Central Government under this Code or in the

discharge of the functions and duties imposed on it under this Code and as a

result of such default the financial position of the Board or the administration

of the Board has deteriorated; or

so to do,

it may, by notification, supersede the Board for such period, not exceeding six

months, as may be specified therein.

(2) Upon the publication of a notification under sub-section (1) superseding

the Board,—

(a) all the Members of the Board shall, as from the date of supersession,

vacate their offices as such;

(b) all the powers, functions and duties which may, by or under the

provisions of this Code, be exercised or discharged by or on behalf of the

Board, shall until the Board is reconstituted under sub-section (3), be exercised

and discharged by such person or persons as the Central Government may

direct; and

National

Institute of

Securities

Markets.

Members,

officers and

employees of

Board to be

public servants.

Power of Central

Government to

issue directions.

Power of Board

to delegate.

Power of Central

Government to

supersede Board.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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Confidentiality

to be maintained

by Board and its

Members.

Power of Central

Government to

grant immunity.

Board is reconstituted under sub-section (3), vest in the Central Government.

(3) On the expiration of the period of supersession specified in the notification

issued under sub-section (1), the Central Government may re-constitute the Board

by a fresh appointment and in such case any person or persons who vacated their

offices under clause (a) of sub-section (2), shall not be deemed disqualified for

appointment:

Provided that the Central Government may, at any time before the expiry of

the period of supersession take action under this sub-section.

(4) The Central Government shall cause a notification issued under

sub-section (1) and a full report of any action taken under this section and the

circumstances leading to such action to be laid before each House of Parliament at

the earliest.

134. The Board and its Members including its officers and employees, a market

infrastructure institution and a self-regulatory organisation including their officers and

employees and the members of their governing board, shall maintain confidentiality

of any regulatory data and other commercially sensitive information that is obtained

or produced in the discharge of their functions under this Code, unless—

(a) any provision of this Code or of any other law for the time being in

force permits or requires its publication or disclosure;

(b) the person from whom it was obtained or the person to whom it

relates, consents to its disclosure;

sources;

(d) the disclosure enables or assists the Board or the market

infrastructure institution concerned or self-regulatory organisation to

discharge its functions under this Code; or

(e) the disclosure is directed by a judicial or a quasi-judicial authority

having jurisdiction, for the purpose of any proceedings.

135. (1) If the Central Government, on the recommendation of the Board, is

satisfied, that any person, who is alleged to have contravened the provisions of this

Code or the rules or regulations or bye-laws made thereunder, has made a full and

true disclosure in respect of the alleged contravention, it may grant to such person,

subject to such conditions as it may think fit, immunity from prosecution for any

offence or from the imposition of any penalty under this Code with respect to the

alleged contravention:

Provided that no immunity shall be granted in such cases where the

proceedings have been instituted before the receipt of application for grant of such

immunity:

Provided further that the recommendation of the Board shall not be binding

upon the Central Government.

(2) Any immunity granted to a person under sub-section (1) may, at any time,

be withdrawn by the Central Government, if it is satisfied that such person had, in

course of the proceedings, not complied with the condition on which the immunity

was granted or had given false evidence, and thereupon such person may be tried

for the offence with respect to which the immunity was granted or for any other

offence of which it appears to have been guilty in connection with the contravention

and shall also be liable to penalty to which such person would have been liable, had

such immunity not been granted.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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30 of 2025.

43 of 1961.

54 of 2002.

136. (1) If any person fails to––

(a) pay the penalty imposed;

(b) comply with any order of the adjudicating officer for refund of

money;

(d) pay any fees due to the Board;

(e) pay the amount due pursuant to an order passed by an Ombudsperson

under this Code,

the Recovery Officer may draw up under his signature a statement in the specified

form, referred to as the certificate of recovery, specifying the amount due from the

person and shall proceed to recover from such person the amount specified in such

certificate by one or more of the following modes, namely:—

(i) attachment and sale of the person’s movable property;

(ii) attachment of the person’s bank accounts;

(iii) attachment and sale of the person’s immovable property;

(iv) arrest of the person and his detention in prison;

(v) appointing a receiver for the management of the person’s movable

and immovable properties,

and for this purpose, the provisions of sections 411 to 419 and 421 of the

Income-tax Act, 2025 and any rules made under these provisions, in so far as

may be, apply with necessary modifications, as if the said provisions and the rules

were made under the provisions of this Code and such amount shall be deemed

to be the amount due under this Code instead of income-tax under the Income-tax

Act, 2025.

Explanation.––For the removal of doubts, it is hereby clarified that,––

(a) the person’s movable or immovable property or money held in bank

account shall include any property or money held in bank account which has

been transferred without adequate consideration, directly or indirectly, on or

after the date when the amount specified in the certificate had become due, by

such person to any other person; and so far as the movable or immovable

property or money held in bank account are transferred to a minor child, such

property shall, even after the date of attainment of majority by such minor

child, continue to be included in the person’s movable or immovable property

or money held in bank account for recovering any amount due from the person

under this Code;

(b) any reference to appeal in Chapter XIX-D of the Income-tax

Act, 2025, shall be construed as a reference to appeal before the Tribunal

under section 85;

shall be calculated from the date the amount becomes payable by the person;

(d) till the provisions of the Income-tax Act, 2025 come into force, the

corresponding provisions of the Income-tax Act, 1961 shall apply.

(2) The Recovery Officer may seek the assistance of the local district

administration including local police while exercising the powers under

sub-section (1).

(3) The recovery under sub-section (1), shall have precedence over any other

claim against such person except the claims of secured creditors as defined in the

Securitisation and Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002.

Recovery of

amounts.

30 of 2025.

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

____________________________________________________________________

______________________________________________________________

___________

_______________________________________________________________

______

_______________________________________________________________

______

Continuance of

proceedings.

Bar of

jurisdiction of

civil court.

Protection of

action taken in

good faith.

(4) The Recovery Officer may, on his own motion or on a request made by

any party, rectify any error apparent on the face of the record in a certificate drawn

or an order issued by him, within a period of thirty days from the date of issuance

of such certificate or order.

(5) The Recovery Officer while rectifying any error under sub-section (4),

shall not modify the substantive part of such certificate or order.

137. (1) On the death of a person, his legal representative shall be liable to pay

any sum which the deceased would have been liable to pay, had he not died, in the

like manner and to the same extent as the deceased:

Provided that the legal representative shall be liable to pay any penalty only

in case the penalty has been imposed before the death of the deceased person.

(2) For the purposes of sub-section (1), any proceeding for disgorgement,

refund or an action for recovery before the Recovery Officer, except a proceeding

for levy of penalty,—

(a) initiated against the deceased before his death, shall be deemed to

have been initiated against the legal representative and may be continued

against such legal representative from the stage at which it stood on the date

of the death of the deceased; and

(b) which would have been initiated against the deceased, if he had

survived and may be initiated against the legal representative,

and all the provisions of this Code shall apply accordingly.

(3) Every legal representative shall be personally liable for any sum payable

by him in his capacity as legal representative if, while his liability for such sum

remains undischarged, he creates a charge on or disposes of or parts with any assets

of the estate of the deceased, which are in, or may come into his possession, but

such liability shall be limited to the value of the asset so charged, disposed of or

parted with.

(4) The liability of a legal representative shall be limited to the extent to which

the estate of the deceased is capable of meeting such liability.

Explanation.––For the purposes of this section, the expression “legal

representative” means a person who in law represents the estate of a deceased

person, and includes any person who intermeddles with the estate of the deceased

and where a party sues or is sued in a representative character, the person on whom

the estate devolves on the death of the party so suing or sued.

138. (1) No civil court shall have jurisdiction to entertain any suit or

proceeding in respect of any matter which the Board, the adjudicating officer, the

market infrastructure institution and the Tribunal are empowered by, or under, this

Code to determine, and no injunction shall be granted by any court or other authority

in respect of any action taken or to be taken in pursuance of any powers conferred

by or under this Code.

(2) No order passed by the Board, the adjudicating officer, the Ombudsperson

or the market infrastructure institution shall be appealable, except as provided in

section 85.

139. No suit, prosecution or other legal proceedings shall lie against the

Central Government or the Board or any officer of the Central Government or any

Member referred to in sub-section (1) of section 4, officer or other employee of the

Board for anything which is done or intended to be done in good faith under this

Code or the rules or regulations or bye-laws made thereunder.

THE GAZETTE OF INDIA EXTRAORDINARY

[Part II—

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______

_______________________________________________________________

______

30 of 2025.

43 of 1961.

28 of 2005.

50 of 2019.

140. Notwithstanding anything contained in the Income-tax Act, 2025 or any

other law for the time being in force relating to tax on income, profit, gains, the

Board shall not be liable to pay income-tax, or any other tax in respect of its income,

profits or gains derived.

Explanation.—For the removal of doubts, it is hereby clarified that till the

provisions of the Income-tax Act, 2025 come into force, the corresponding

provisions of the Income-tax Act, 1961 shall apply.

141. Notwithstanding anything contained in any other law for the time being

in force, the powers exercisable by the Board under this Code,—

(a) shall not extend to an International Financial Services Centre set up

under sub-section (1) of section 18 of the Special Economic Zones Act, 2005;

(b) shall be exercisable by the International Financial Services Centres

Authority established under sub-section (1) of section 4 of the International

Financial Services Centres Authority Act, 2019,

in so far as regulation of financial products, financial services and financial

institutions that are permitted in the International Financial Services Centres are

concerned.

142. The provisions of this Code shall be in addition to, and not in derogation

of the provisions of any other law for the time being in force.

143. (1) The provisions of this Code shall not apply to the Central

Government, the Reserve Bank, any local authority or any corporation set up by a

special law or any person who has effected any transaction with or through the

agency of any such authority referred to in this sub-section:

Provided that the provisions of this Code shall apply to such transactions or

securities that are listed or proposed to be listed and to the issuer of such securities.

(2) Without prejudice to the provisions contained in sub-section (1), if the

Central Government is of the opinion that in the interest of trade and commerce or

the economic development of the country, it is necessary or expedient so to do, it

may notify any class of contracts to which the provisions of this Code shall not

apply, subject to such conditions, limitations or restrictions, if any.

144. The Central Government may, by order published in the Official Gazette,

direct that the powers except the powers under sections 131, 135 and 145 exercisable

by it under this Code shall, in relation to such matters and subject to such conditions,

if any, as may be specified in the order, be exercisable also by the Board or the

Reserve Bank.

145. (1) The Central Government may, by notification and subject to the

condition of previous publication, make rules not inconsistent with the provisions

of this Code for carrying out the purposes of this Code:

Provided that where the Central Government is of the opinion that the rules

are required to be made urgently in public interest, it may, for reasons to be recorded

in writing, dispense with the condition of previous publication.

(2) In particular and without prejudice to the generality of the foregoing

power, such rules may provide for all or any of the following matters, namely:––

(a) the manner of appointment of Chairperson and Members under

sub-section (3) of section 4;

(b) the other terms and conditions under sub-section (3) of section 5;

of section 11;

(d) the manner of crediting settlement amount to the Consolidated Fund

of India under sub-section (8) of section 26;

Exemption from

tax on income.

Power of Board

not to apply to

International

Financial

Services Centre.

Application of

other laws not

barred.

Code not to

apply in certain

cases.

Power of Central

Government to

delegate.

Power to make

rules.

Sec. 2]

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Power to make

regulations.

(e) the salaries, allowances and conditions of service of the officers and

employees of the Tribunal under sub-section (3) of section 84;

(f) the form, manner and fee for filing an appeal under sub-section (3) of

section 85;

(g) the other matters under clause (h) of sub-section (2) of section 86;

(h) the manner of crediting all sums realised by way of penalty into

Consolidated Fund of India under section 112;

(i) the terms and conditions and the sums payable under sub-section (1)

of section 117;

(j) the form for maintaining proper accounts, other relevant records and

the preparation of annual statement of account alongwith the accounts of the

Investor Protection and Education Fund under sub-section (1) of section 126;

(k) the time, form and manner of furnishing returns, statements and

particulars in regard to any proposed or existing programme for the promotion

and development of securities markets under sub-section (1) of section 127;

(l) the form for submitting report, giving a true and full account of

activities, policies and programmes during the previous financial year under

sub-section (2) of section 127;

(m) any matter which is to be or may be prescribed or in respect of which

provisions is to be made by rules.

146. (1) The Board may, by notification make regulations not inconsistent

with the provisions of this Code for carrying out the purposes of this Code.

(2) In particular and without prejudice to the generality of the foregoing

power, such regulations may provide for all or any of the following matters,

namely:—

(a) the other services for the purposes of the definition of depository

services under sub-clause (iv) of clause (l) of section 2;

(b) the form of records under clause (ze) of section 2;

at the meetings of the Board, including quorum and the manner of maintaining

arrangements for recording, safe-keeping and for taking decisions and

publication thereof under sub-section (1) of section 8;

(d) the direct or indirect interest, including the interest of any family

member, under sub-section (4) of section 8;

(e) the qualifications, method of recruitment and the terms and

conditions of service of officers and employees of the Board under

sub-section (2) of section 9;

(f) the manner for undertaking inspection of a securities markets service

provider, a market participant or any other person associated with the

securities markets under section 12;

(g) the manner of seeking assistance by the Board of a securities markets

service provider or an expert to assist the Investigating Officer under

sub-section (1), the form of the order directing investigation under

sub-section (2), the criteria and manner of quantification of unlawful gains or

losses under sub-section (3) and the procedure of conducting investigation

under sub-section (5), of section 13;

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(h) the form and manner of serving notice by the Investigating Officer

under sub-section (6) of section 14;

(i) the rank of officer to be designated as an adjudicating officer under

sub-section (1) of section 17;

(j)

the manner for conducting adjudication proceedings under

sub-section (4) of section 17;

(k) the relevant document and particulars to be enclosed with a show

cause notice under sub-section (1) of section 18;

(l) the procedure, the criteria for distribution of disgorged amount, the

order of priority and the other conditions to provide restitution from the

disgorged amount under sub-section (2) of section 25;

(m) the conditions, the fee, the time and manner of filing an application

for settlement of proceedings initiated or to be initiated under sub-section (1),

the members, the terms and conditions for constitution of committee for

advising the Board under sub-section (2), the other factors for settlement

proceedings under sub-section (3) and the manner for conducting settlement

proceedings under sub-section (6), of section 26;

(n) the form and manner, the eligibility criteria and fee payable and the

period for rectification of the defects in the application for registration under

sub-section (2) and the form and manner, the terms and conditions and the

time period for issuing a certificate of registration and any additional

conditions under sub-section (3), of section 28;

(o) the form and manner and the conditions for surrendering the

certificate of registration under sub-section (1), and the period of suspension

or cancellation of such certificate and the other grounds for such suspension

or cancellation under sub-section (2), of section 29;

(p) the class or classes of investors under sub-section (1) of section 30;

(q) the manner in which investment schemes shall be conducted,

operated or promoted including the matters related to contribution or

subscription made by an investor under sub-section (3) section 32;

(r) the manner of investment of funds raised or collected under

sub-section (1), and the manner and extent of borrowing and issuing debt

securities by pooled investment vehicles under sub-section (2), of section 33;

(s) the manner of facilitating or providing services related to the issue,

sale, purchase or any dealings in securities under sub-section (1), and the

manner and the period within which to charge brokerage, deliver securities

and make payment to an investor under sub-section (2), of section 34;

(t) the information and the frequency thereof under sub-section (1), and

the manner of furnishing information by a securities markets service provider,

market participant or a person associated with securities markets under

sub-section (2), of section 35;

(u) the manner and the period to invest money by a securities markets

service provider under sub-section (3) of section 35;

(v) the form, manner and fee for registration as a market infrastructure

institution under sub-section (2), and the conditions for the bye-laws of the

applicant, the form and other conditions for grant of registration to the

applicant and the period for rectification of defects in the application for

registration under sub-section (3), of section 37;

Sec. 2]

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(w) the manner in which the Board may order to cancel the certificate of

registration of market infrastructure institutions under sub-section (1) of

section 38;

(x) such other matters under clause (u) of sub-section (2) of section 39;

(y) the mechanisms under sub-section (2) of section 41;

(z) the conditions under sub-section (1) of section 42;

(za) the manner of management of the board of market infrastructure

institution under sub-section (2), and the manner of demutualisation of market

infrastructure institution under sub-section (3), of section 42;

(zb) the manner of furnishing annual report and other information by

market infrastructure institution to the Board under section 43;

(zc) the manner of being admitted as member or client of member or

principal under sub-section (1) of section 52;

(zd) the conditions and procedures for issuance and holding of other

regulated instrument through depositories under clause (b) of sub-section (1)

of section 54;

(ze) the manner of surrender of certificate of security or other regulated

instrument under sub-section (1), the time period for completion of the process

of dematerialisation and informing the depository under sub-section (2), and

the period for dematerialisation of the certificate of securities under

sub-section (4), of section 56;

(zf) the other particulars to be maintained by depository under section 57;

(zg) the rights and obligations of depositories, depository participants

and issuers under sub-section (1), the eligibility criteria for admission of

securities or other regulated instrument on depositories and the manner of

holding or transfer of such securities or other regulated instrument under

sub-section (2), the manner of exercising the rights and interest and any other

connected operational or incidental matters under sub-section (3), the manner

of maintaining records by a depository under sub-section (4), and the

procedures and good practices under sub-section (5), of section 62;

(zh) the eligibility criteria and requirements for securities to be offered

to public and listed on stock exchange under sub-section (1), the conditions to

be complied by every issuer intending to offer securities to the public or for

listing under sub-section (2), the other conditions where securities are listed

on stock exchange under sub-section (3) and the time period and manner in

respect of repayment of all money under sub-section (4), of section 64;

(zi) the requirements and other matters under sub-section (1) of section 65;

(zj) the manner of delisting of securities by stock exchange under

sub-section (1), and the grounds for such delisting under sub-section (2), of

section 66;

(zk) the form and manner for implementing the delivery arrangements

by a market infrastructure institution under section 69;

(zl) the manner of making the investor charter and such other matters

concerning the investors under section 71;

(zm) the manner and the period for receiving, monitoring and redressing

investor grievance under sub-section (1), and the period for informing the

investor under sub-section (2), of section 72;

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(zn) the manner and timelines for the grievance redressal under

sub-section (3) of section 73;

(zo) the form and manner of filing a complaint to an Ombudsperson

under sub-section (2) of section 74;

(zp) the amount to be paid to the complainant as damages under

clause (c) of sub-section (1) of section 75;

(zq) the other fraudulent or unfair practices in the securities markets

under clause (f) of section 92;

(zr) the other activities which adversely affects the integrity of the

securities markets under clause (g) of section 93;

(zs) the conditions and procedures relating to the issuance and the

manner of holding of other regulated instrument through depositories under

sub-section (2) of section 118;

(zt) the other conditions for listing, trading, clearance and settlement of

other regulated instrument on a stock exchange under sub-section (2) of

section 119;

(zu) such other persons under clause (b) of sub-section (1) and the

manner of administration and utilisation of the Investor Protection and

Education Fund under sub-section (2), of section 125;

(zv) the manner of establishing a regulatory sandbox under

sub-section (1) and the conditions, and procedure in respect of a regulatory

sandbox under clause (c) of sub-section (3), of section 128;

(zw) the manner and conditions of issuing subsidiary instructions under

sub-section (1) of section 149;

(zx) the manner of the constitution of Advisory Committees under

section 150;

(zy) such other matter which is required to be, or may be, specified by

regulations or in respect of which provision is to be made by regulations.

147. (1) The Board shall ensure transparency while making regulations by—

(a) publishing draft regulations along with such other details on its website,

inviting public comments for a specific period prior to issuing regulations;

(b) publishing a general statement of its response to the public

comments, not later than the date of notification of the regulations;

(2) Notwithstanding anything contained in sub-section (1), where the Board is

of the opinion that the regulations are required to be made urgently in public interest,

it may, for reasons to be recorded in writing, dispense with the condition of

publication of draft regulations.

148. Every rule, regulation and bye-law made and subsidiary instruction issued

under this Code shall be laid, as soon as may be after it is made or issued, before each

House of Parliament, while it is in session, for a total period of thirty days which may

be comprised in one session or in two or more successive sessions, and if, before the

expiry of the session immediately following the session or the successive sessions

aforesaid both Houses agree in making any modification in the rule or regulation or

bye-law or subsidiary instruction or both Houses agree that the rule or regulation or

bye-law or subsidiary instruction should not be made or issued, such rule or regulation

or bye-law or subsidiary instruction shall thereafter have effect only in such modified

form or be of no effect, as the case may be; so, however, that any such modification

or annulment shall be without prejudice to the validity of anything previously done

under that rule or regulation or bye-law or subsidiary instruction.

Process of

issuing

regulations.

Rules,

regulations,

bye-laws and

subsidiary

instructions to be

laid before

Parliament.

Sec. 2]

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Subsidiary

instructions.

Advisory

Committees.

Power to remove

difficulties.

Repeal and

saving.

149. (1) The Chairperson individually or with a whole-time Member; or two

whole-time Members of the Board may, issue subsidiary instructions in such manner

and subject to such conditions as may be specified by regulations for the following

purposes, namely:—

(a) clarifying the ambiguity in any regulation, if any; and

(b) laying down any procedural requirement ancillary to any regulation:

Provided that before making such instructions, the concerned Advisory

Committee constituted under section 150 may be consulted, if necessary.

(2) Any contravention of the subsidiary instructions shall amount to

contravention of the regulations it relates to.

150. The Board may constitute one or more Advisory Committees, in such

manner as may be specified by regulations, to advise it on—

(a) matters relating to the making of subsidiary instructions under

section 149; and

(b) any other issue relating to the administration of this Code:

Provided that the advice of or consultation with an Advisory Committee shall

not be binding on the Board.

151. (1) If any difficulty arises in giving effect to the provisions of this Code,

the Central Government may, by order published in the Official Gazette, make such

provisions not inconsistent with the provisions of this Code as may appear to it to

be necessary or expedient for removing the difficulty:

Provided that no order shall be made under this section after the expiry of three

years from the date of commencement of this Code.

(2) Every order made under this section shall be laid, as soon as may be after

it is made, before each House of Parliament.

152. (1) The Securities Contracts (Regulation) Act, 1956, the Securities and

Exchange Board of India Act, 1992 and the Depositories Act, 1996 are hereby

repealed:

Provided that sub-sections (1) and (2) of section 3 and section 15K of the

Securities and Exchange Board of India Act, 1992 shall continue to apply as if that

Act has not been repealed.

(2) Notwithstanding such repeal,––

(a) if, immediately before the commencement of this Code, there is any

inspection or investigation, application, adjudication, trial or appeal pending,

then such inspection, investigation, application, adjudication, trial or appeal

shall be made or held or continued or disposed of, as the case may be, in

accordance with the provisions of the Securities Contracts (Regulation)

Act, 1956, the Securities and Exchange Board of India Act, 1992 and the

Depositories Act, 1996, as in force immediately before such commencement

(hereinafter referred to as the repealed enactments), as if this Code had not

come into force;

(b) anything done or any action taken or purported to have been done or

taken, including any rule, notification, regulation, scheme, order or notice

made or issued or any appointment or declaration made or any operation

undertaken or any direction given shall, in so far as it is not inconsistent with

the provisions of this Code, be deemed to have been done or taken under the

corresponding provisions of this Code;

42 of 1956.

15 of 1992.

22 of 1996.

15 of 1992.

42 of 1956.

15 of 1992.

22 of 1996.

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10 of 1897.

42 of 1956.

15 of 1992.

22 of 1996.

42 of 1956.

appointment, conveyance, mortgage, deed, registration, recognition,

document or agreement made or issued, fee directed, resolution passed,

direction given, proceeding initiated, instrument executed or issued, or thing

done under or in pursuance of any repealed enactment shall, if in force at the

commencement of this Code have effect as if the aforementioned Acts have

not been repealed;

(d) any principle or rule of law or established jurisdiction, form or course

of pleading, practice or procedure or existing usage, custom, privilege,

restriction or exemption shall not be affected, notwithstanding that the same

respectively may have been in any manner affirmed or recognised or derived

by, in, or from, the repealed enactments;

(e) any person appointed under the provisions of the repealed enactments

and holding office as such immediately before the commencement of this

Code, shall, on such commencement continue to hold his office under the

corresponding provisions of this Code, unless removed or superannuated;

(f) all funds constituted and established under the repealed enactments

shall be deemed to be the funds constituted or established under the

corresponding provisions of this Code and all money in such funds shall be

treated accordingly; and

(g) any jurisdiction, custom, liability, right, title, privilege, restriction,

exemption, usage, practice, procedure or other matter or thing, not in existence

or in force shall not be revised or restored.

(3) The mention of particular matters in sub-section (2) shall not be held to

prejudice or affect the general application of section 6 of the General Clauses

Act, 1897 with regard to the effect of such repeal.

153. Any references in any other enactment or in any instrument to—

(a) the Securities Contracts (Regulation) Act, 1956, the Securities and

Exchange Board of India Act, 1992 and the Depositories Act, 1996; or

(b) any rules or regulations or bye-laws made, or any circulars, schemes,

orders or guidelines issued thereunder,

shall unless a different intention appears, be construed as a reference to the

corresponding provisions of this Code, the rules, regulations or bye-laws made, or

orders issued or subsidiary instruction issued thereunder.

Explanation.––For the purposes of this section, any references to,––

(a) “participant” as defined under clause (g) of sub-section (1) of

section 2 of the Depositories Act, 1996, shall mean a depository participant

under the provisions of this Code;

(b) “recognised stock exchange” defined under clause (f) of section 2 of

the Securities Contracts (Regulation) Act, 1956, shall mean “stock exchange”

as defined under clause (zn) of section 2 of this Code; or

“bye-laws” as defined under clause (e) of section 2 of this Code.

References to

repealed

enactments.

Sec. 2]

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Amendment of

Act 12 of 1974.

Amendment of

Act 15 of 2003.

Amendment of

Act 17 of 2018.

Amendment of

Act 32 of 2023.

CHAPTER XVIII

AMENDMENTS TO CERTAIN ACTS

154. The Economic Offences (Inapplicability of Limitation) Act, 1974 shall

be amended in the manner provided in the First Schedule.

155. The Prevention of Money-laundering Act, 2002 shall be amended in the

manner provided in the Second Schedule.

156. The Fugitive Economic Offenders Act, 2018 shall be amended in the

manner provided in the Third Schedule.

157. The Mediation Act, 2023 shall be amended in the manner provided in the

Fourth Schedule.

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THE SECOND SCHEDULE

(See section 155)

AMENDMENT TO THE PREVENTION OF MONEY-LAUNDERING ACT, 2002

(15 OF 2003)

In the Prevention of the Money-laundering Act, 2002, in Part A of the

Schedule, for Paragraph 11, the following paragraph shall be substituted, namely:—

“PARAGRAPH 11

OFFENCES UNDER THE SECURITIES MARKETS CODE, 2025

Section

Description of offence

93 read with

Prohibition of market abuse.

Punishment for market abuse.

Punishment for failure to comply

with orders.”.

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THE THIRD SCHEDULE

(See section 156)

AMENDMENT TO THE FUGITIVE ECONOMIC OFFENDERS ACT, 2018

(17 OF 2018)

In the Fugitive Economic Offenders Act, 2018, in the Schedule, for Entry VIII,

the following entry shall be substituted, namely:—

“VIII.

Offences under the Securities

Markets Code, 2025.

93 read with 96

Prohibition of market abuse.

Punishment for market abuse.

Punishment for failure to

comply with orders.”.

Sec. 2]

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STATEMENT OF OBJECTS AND REASONS

The sound regulation of securities markets is imperative as such markets are

instrumental for effective mobilization of capital for productive investments, wealth

creation and protection of investors’ confidence.

2. The extant laws relating to the securities markets are primarily (i) the

Securities Contracts (Regulation) Act, 1956 (42 of 1956) enacted to prevent

undesirable transactions in securities by regulating the business of dealings therein;

(ii) the Securities and Exchange Board of India Act, 1992 (15 of 1992) providing

for the establishment of the Securities and Exchange Board of India (the “Board”)

as the primary regulator for the securities markets to protect the interests of investors

in securities and to promote the development of, and to regulate, the securities

market; and (iii) the Depositories Act, 1996 (22 of 1996) that provides for regulation

of depositories in securities. As these laws were enacted decades ago, a review was

required to reform the extant legislative framework to align with the evolving

regulatory practices, latest developments in technology and the changing character

of securities markets.

3. The Securities Markets Code, 2025 seeks to repeal the aforesaid three Acts,

rationalises and consolidates the existing provisions and provides a modern

regulatory framework for investor protection and capital mobilisation at a scale

commensurate with the emerging needs of the fast-growing Indian economy. The

Code endeavours to build a principle based legislative framework to reduce

compliance burden, improve regulatory governance and enhance dynamism of the

technology driven securities markets. The language of the Code has been simplified

to remove obsolete and redundant concepts, to duplication of provisions and

incorporate consistent regulatory procedures for standard processes, and to ensure a

uniform and streamlined framework of Securities Laws. The Code is expected to

further develop the financial sector in general and securities markets in particular

and make India self-reliant in terms of mobilising capital for productive investment.

4. The Code seeks to strengthen the regulatory mechanism of the “Board” by

providing a transparent and consultative process for issuing any subordinate

legislation. It also requires periodic review of such regulations for their

proportionate and effective implementation and regulatory impact assessment

studies. The Code seeks to eliminate conflict of interest by requiring the Members

of the “Board” to disclose any “direct or indirect” interest while participating in

decision-making. It enables the “Board” to maintain a reserve fund and transfer the

surplus, if any, to the Consolidated Fund of India. It streamlines the adjudication

procedure and ensures that all quasi-judicial actions are undertaken through a single

adjudication process after an appropriate fact-finding exercise. The Code maintains

an arm’s length separation between inspection or investigation and adjudication

proceedings and defines timelines for investigations and interim orders for a

time-bound completion of the enforcement process.

5. As a significant progressive step, the Code decriminalises certain

contraventions of minor, procedural and technical nature into civil penalties to

facilitate the ease of doing business and to reduce the compliance burden. The civil

penalties are anchored to unlawful gains or losses caused with a view to ensure

appropriate and adequate response to the gravity of the contraventions. It promotes

standardisation in quantifying unlawful gains and losses to investors and fosters

objectivity in undertaking enforcement actions like penalty imposition. However,

punishment for market abuse is provided to deter persons from committing

contraventions that adversely affect the market integrity. Further, the Code provides

restriction period for initiating inspection or investigation to avoid delayed

enforcement measures.

Sec. 2]

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6. The Code further seeks to strengthen investor protection, promote investor

education and awareness, and ensure effective and time-bound redressal of investor

grievances. It enables effective and prompt resolution of investor grievances by

introducing the concept of an Ombudsperson as a comprehensive platform for

redressal of any unresolved grievances. The Code also enables the Board to establish

a Regulatory Sandbox to facilitate innovation in financial products, contracts and

services. Furthermore, an enabling framework is established for the inter-regulatory

coordination of other regulated instruments to facilitate a seamless process for

listing of such instruments.

7. The Code also proposes to amend the Economic Offences (Inapplicability

of Limitation) Act, 1974 (12 of 1974), the Prevention of Money-laundering

Act, 2002 (15 of 2003), the Fugitive Economic Offenders Act, 2018 (17 of 2018)

and the Mediation Act, 2023 (32 of 2023) in the manner provided in the Schedules

annexed to the Code.

8. The Notes on Clauses explain in detail the various provisions contained in

the Bill.

9. The Bill seeks to achieve the above objectives.

NEW DELHI;

NIRMALA SITHARAMAN.

The 15th December, 2025.

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Notes on clauses

Clause 1 of the Bill provides for the short title extent and commencement of

the Code.

Clause 2 of the Bill provides for definition of various terms and expressions

used in the proposed legislation.

Clause 3 of the Bill provides for the Securities and Exchange Board of India

established and incorporated under section 3 of the Securities and Exchange Board

of India Act, 1992, shall be the Board for the purposes of this Code.

Clause 4 of the Bill provides for the composition of the Board.

Clause 5 of the Bill provides for the terms and conditions of service of the

Chairperson and Members of the Board.

Clause 6 of the Bill provides for the circumstances for removal of Chairperson

and Member of the Board.

Clause 7 of the Bill provides for the management of the Board by its Board of

Members and the Chairperson.

Clause 8 of the Bill provides for conduct of the meetings of the Board,

including the requirement to disclose any direct and indirect interest including the

interest of a family member as specified in the regulation.

Clause 9 of the Bill provides for appointment of officers and employees by

the Board.

Clause 10 of the Bill provides that the vacancy or defect in the constitution of

the Board or appointment of Members or irregularity in procedure shall not

invalidate an act or proceedings of the Board.

Clause 11 of the Bill provides that the Board shall protect the interest of investors

in securities and promote the development of, and regulate the securities markets, by

such measures as it may deem fit, subject to the provisions of this Code. It also provides

for specific powers and functions to be exercised or performed by the Board.

Clause 12 of the Bill provides for the powers and functions of the Board to

inspect a securities markets service provider, a market participant or any other

person associated with securities markets in such manner as may be specified by

regulations.

Clause 13 of the Bill provides for the powers and functions of the Board

relating to investigations.

Clause 14 of the Bill provides for general powers and obligations of the

Investigating Officer and also imposes obligations on a person under investigation.

Clause 15 of the Bill provides for powers related to search and seizure in

relation to the investigation conducted by the Investigating Officer.

Clause 16 of the Bill restricts the initiation of inspection and investigation after

eight years, except in specific circumstances. It also specifies how to calculate the

eight year period for different types of defaults or contravention in other

circumstances.

Clause 17 of the Bill provides for the designation of the adjudication officer,

once the inspection or investigation is completed, and where the Board is of the

opinion that adjudication is required. It further provides for disqualification of

certain persons from being appointed as an adjudicating officer to ensure the

separation of functions.

Sec. 2]

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Clause 18 of the Bill provides for that once the adjudicating officer is

designated, the adjudicating officer shall issue a show cause notice containing the

relevant details for the notice and the noticee shall reply in writing along with

evidence in support; or else the adjudicating officer may proceed to adjudicate the

matter ex parte. Further, the adjudicating officer is vested with the powers of a civil

court.

Clause 19 of the Bill provides a list of factors that shall guide the adjudicating

officer in determining the appropriate action to be taken in a matter, including

its severity.

Clause 20 of the Bill provides for the final order to be passed in adjudication

of a show cause notice. The adjudicating officer may either dismiss the show

cause notice or pass a common order comprising one or more of the actions listed

in this provision.

Clause 21 of the Bill empowers the Board to revise the final order passed by

the adjudicating officer, to increase the quantum of penalty and the severity of the

direction, where the adjudicating officer has decided to take those actions.

Clause 22 of the Bill empowers the adjudicating officer or the Board to rectify

an order for typographical or other inadvertent errors, without modifying the

substantive part of the order.

Clause 23 of the Bill provides for the power of the adjudicating officer to issue

directions or warnings as part of the final order, where the grounds mentioned in

sub-section (1) are satisfied.

Clause 24 of the Bill empowers the adjudicating officer to issue cease and

desist orders, pending adjudication or on completion thereof final order.

Clause 25 of the Bill provides for the power of the adjudicating officer to

disgorge an amount equivalent to the unlawful gains made by the default or

contravention. It also enables the Board to provide restitution to persons affected by

the default or contravention if certain conditions are fulfilled, in accordance with

the procedure specified by the Board.

Clause 26 of the Bill provides for the settlement of administrative and civil

proceedings. It also enables SEBI to consider a settlement application by persons

seeking to voluntarily disclose true and vital information which may amount to a

contravention.

Clause 27 of the Bill provides the power to pass interim orders after the initiation

of the inspection and investigation and before the completion of adjudication. It

further provides that the person concerned shall be given an opportunity of being heard

before an interim order is issued against him; provided, this requirement may be

dispensed with in case of urgency if the conditions for issuing an interim order are

met. It also provides that the interim order shall remain valid for a period not more

than one hundred eighty days which can be extended as per sub-section (4). It also

provides for extension of the interim order up to two years.

Clause 28 of the Bill provides for mandatory registration requirements for

intermediaries, self-regulatory organisations and sponsors of pooled investment

vehicles and investment schemes in the securities markets.

Clause 29 of the Bill provides for the procedures for surrender, suspension

and cancellation of registration of intermediaries and other persons holding a

certificate of registration under clause 28 and the powers of the adjudicating officer

to cancel the registration or suspend it for the period specified by the regulations.

Clause 30 of the Bill provides for the Board to specify by regulations a class

or classes of investors to be registered with it.

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Clause 31 of the Bill provides for the delegation of powers of registration by

the Board in respect of any class or classes of intermediaries or investors to a market

infrastructure institution or a self-regulatory organisation.

Clause 32 of the Bill provides for the provisions in relation to investment

schemes with different characteristics and the schemes which shall not be treated as

investment schemes.

Clause 33 of the Bill provides for the pooled investment vehicles to mean a

fund that is established for investment scheme in the form of trust etc., and various

provisions for the same.

Clause 34 of the Bill provides for the provisions in relation to intermediaries

which shall provide services related to the issue, sale, purchase or any dealings in

securities.

Clause 35 of the Bill provides for the obligation of securities markets service

providers to make fair disclosure of such information and at such frequency as may

be specified by regulations.

Clause 36 of the Bill provides for the Board to approve the governing norms

of a self-regulatory organisation.

Clause 37 of the Bill provide for the mandatory registration requirements for

market infrastructure institutions to carry out business in the securities markets.

Clause 38 of the Bill provides for cancellation of registration or suspension of

business of market infrastructure institutions in the interest of trade or public

interest. It further provides that no cancellation of registration or suspension of

business shall be made without giving an opportunity of being heard to the applicant.

Clause 39 of the Bill empowers market infrastructure institutions to make

bye-laws and specifies the details therein to be included in the bye-laws.

Clause 40 of the Bill provides the power of the Board to direct bye-laws to be

made or to make such bye-laws.

Clause 41 of the Bill provides that where a member contravenes a bye-law of

a market infrastructure institution, the market infrastructure institution may, by an

order, take measures against such members.

Clause 42 of the Bill provides certain ownership norms for, and the manner of

management of, market infrastructure institutions.

Clause 43 of the Bill provides that a market infrastructure institution shall

furnish a copy of its annual report and such other information in such manner as

may be specified by regulation, to the Board.

Clause 44 of the Bill empowers the Central Government, on the

recommendation of the Board, to supersede the governing board of a market

infrastructure institution or a self-regulatory organisation.

Clause 45 of the Bill provides the circumstances in which the contracts for or

relating to the purchase or sale or any dealings in securities shall be illegal.

Clause 46 of the Bill provides that contracts shall be legal and valid if they are

made in accordance with the provisions of the Code and any rules or

regulations or bye-laws made thereunder and are traded on a stock exchange or

settled by a clearing corporation in accordance with the regulations made by the

Board in this behalf.

Clause 47 of the Bill provides that any contract which is in contravention of

any bye-laws of a stock exchange specified on that behalf, shall be void.

Clause 48 of the Bill lists certain types of contracts which shall not be deemed

to be illegal or require prior permission of the Board.

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Clause 49 of the Bill empowers the Central Government to notify for

commodity in respect of which a derivatives may be entered into or made by any

person.

Clause 50 of the Bill empowers the Central Government in the public interest or

trade to regulate and control non-transferable specific delivery contracts in commodity

or securities, etc., to declare by notification for the applicability of provision of this Code

for such class or classes of non-transferable specific delivery contracts and spot delivery

contracts for the sale or purchase of such securities.

Clause 51 of the Bill provides for the prohibition of organising or to become

member of any association or entity without any registration regarding performance

of contracts in securities.

Clause 52 of the Bill prohibits persons to deal in securities through market

infrastructure institutions without being a member or a principal.

Clause 53 of the Bill provides the provisions in relation to title to dividends

and income from securities.

Clause 54 of the Bill provides for the powers of the Board in respect of

depository services.

Clause 55 of the Bill provides for that securities and other regulated

instruments in depositories shall be in a dematerialised and fungible form.

Clause 56 of the Bill provides for the process of dematerialisation in respect

of securities and other regulated instruments held by depositories by surrendering

the certificate of securities and other regulated instruments.

Clause 57 of the Bill provides for the requirements relating to the maintenance

of the register and index of beneficial owners by a depository.

Clause 58 of the Bill provides for the manner of registration of the transfer of

a security or other regulated instrument in the name of the transferee which shall be

the conclusive proof of title of the transferee over such security or other regulated

instruments.

Clause 59 of the Bill provides for the manner of creation of a pledge or

hypothecation in respect of securities and other regulated instruments through a

depository by the beneficial owner by the previous approval of the depository.

Clause 60 of the Bill provides for every depository to furnish information and

records and cast duty on issuer to deposit the copy of all relevant records.

Clause 61 of the Bill provides for the rights of registered owners and the

beneficial owner in respect of securities or other regulated instruments held by a

depository.

Clause 62 of the Bill provides for the obligations of a depository in respect of

the securities or other regulated instruments held by it. It further provides the

eligibility criteria for admission of securities and the manner of holding the same

and to maintain records of beneficial owner.

Clause 63 of the Bill provides the application of the Bankers’ Books Evidence

Act, 1891 in relation to a depository as if it were a bank as defined in section 2 of

that Act.

Clause 64 of the Bill provides that no securities shall be offered to the public

or listed on a Stock Exchange without fulfilling the eligibility criteria.

Clause 65 of the Bill empowers the Board to specify by regulations, the listing

and disclosure requirements for issuers. It further provides that the Central

Government may by notification in the public interest, exempt any listed public

sector company from the requirements.

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Clause 66 of the Bill enables the issuer to apply to the Stock Exchange to delist

its securities. It further provides that the stock exchange may also on its own

delist the securities of an issuer subject to giving an opportunity of hearing to the

issuer.

Clause 67 of the Bill provides that the stock exchange may refuse to list or

delist the securities of an issuer with reasons.

Clause 68 of the Bill provides for the manner of netting and settlement of

transactions undertaken on a stock exchange or clearing corporation.

Clause 69 of the Bill provides for the Market Infrastructure Institution to

implement delivery arrangements in respect of contracts of securities as per the

regulations.

Clause 70 of the Bill provides precedence over other attachments to dues to

be recovered by a clearing corporation in furtherance of its clearing and settlement

functions.

Clause 71 of the Bill empowers the Board to specify by regulations, an

investor charter providing principles for the protection of investors and facilitation

of their participation in the securities markets and such other matters concerning the

investors.

Clause 72 of the Bill provides for the Board to specify by regulation an

investor grievance redressal mechanism and also direct a securities markets service

provider and an issuer to provide investor grievance redressal mechanisms.

Clause 73 of the Bill empowers the Board to designate one or more of its

officer as an Ombudsperson to receive and redress the grievances of investors.

Clause 74 of the Bill provides that the investor shall first resolve his grievance

through the investor grievance redressal mechanisms referred to in section 72 within

a period of one hundred and eighty days from the date of first filing of such

grievance in any of these mechanisms. It further provides that if the grievance is not

resolved within this period, the investor may choose to continue the resolution

through these mechanisms or, within thirty days after the completion of this period,

file a complaint with the Ombudsperson. It also provides an explanation to explain

the meaning of deficiency in service. It also provides that a complaint cannot be

filed before the Ombudsperson if a person has initiated a proceeding under any other

law in respect of a matter that is directly or substantially in issue in such a complaint.

Clause 75 of the Bill provides that the Ombudsperson may pass an order to

direct the respondent to comply with its obligation; return the fee; pay damages;

etc., to the complainant after giving him an opportunity of being heard and such

order shall be binding to both the parties.

Clause 76 of the Bill provides that while redressing a complaint, if the

Ombudsperson is of the opinion that the respondent has contravened any provisions

of the Code or the rules or regulations made thereunder, he may inform the Board

of such contravention.

Clause 77 of the Bill provides that the Ombudsperson shall have certain

powers of a civil court.

Clause 78 of the Bill provides that any order of an Ombudsperson shall not

prevent the Board from taking any other action under the Code.

Clause 79 of the Bill provides that the Securities Appellate Tribunal

established under section 15K of the Securities and Exchange Board of India Act,

1992 shall be the Securities Appellate Tribunal, for the purposes of the Code.

Clause 80 of the Bill provides for the composition of the Tribunal and its

Benches.

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Clause 81 of the Bill provides for the appointment, qualifications, terms and

conditions of service of the Presiding Officer and other Members of the Tribunal as

per the applicable law. It further provides that on the date of commencement of the

Code, the Presiding Officer and the Member of the Tribunal shall continue in their

office till the remaining period of the tenure unless removed under the provisions of

the applicable law.

Clause 82 of the Bill provides for the filling up of the vacancies in the office

of the Presiding Officer or any other Member of the Tribunal.

Clause 83 of the Bill provides for the senior-most Judicial Member to act as

Presiding Officer in case of vacancy in his office.

Clause 84 of the Bill provides for the officers and employees of the Tribunal.

It further provides the officers and employees shall discharge their function under

the General Superintendence of the Presiding Officer. It also provides that the

Central Government may by rules provides for their salaries, allowance and other

condition of service.

Clause 85 of the Bill provides for the appeal to the Tribunal. It provides for

the orders or decisions against which an appeal can be made to the Tribunal. It

further provides that the appeal may be filed within a period of fourty-five days

from the date of order made to the Board. It also provides a proviso

empowering the Tribunal to entertain an appeal beyond the said period with

sufficient reasons.

Clause 86 of the Bill provides the powers of the Tribunal that of a civil court

and shall follow the principle of natural justice. It further provides that proceeding

before the Tribunal shall be deemed to a judicial proceeding within the meaning of

Bharatiya Nyaya Sanhita, 2023. It also provides for various provisions of Presiding

Officer.

Clause 87 of the Bill provides for that the order constituting the Tribunal shall

be final and vacancies or defects in the constitution of the Tribunal, will not

invalidate proceedings of the Tribunal.

Clause 88 of the Bill provides for the right to legal representation of a party

before the Tribunal, either by itself or through persons authorised by such party.

Clause 89 of the Bill provides for the applicability of the provisions of the

Limitation Act, 1963, as far as they apply to an appeal made to the Tribunal.

Clause 90 of the Bill provides that the Presiding Officer, Members and other

officers and employees of the Tribunal be deemed as “public servants” within the

meaning of clause (28) of section 2 of the Bharatiya Nyaya Sanhita, 2023.

Clause 91 of the Bill provides for the appeal to the Supreme Court within a

period of sixty days from the date of communication of the decision or orders of the

Tribunal by any aggrieved person. It further provides that the Supreme Court may

entertain an appeal after the period of sixty days with sufficient cause.

Clause 92 of the Bill lists certain prohibited practices and dealings in securities

which pertain to fraudulent or unfair practices such as use of any manipulative or

deceptive device in connection with issue, purchase, sale or any dealing in

securities; defraud in connection with issue or dealing in securities; make any false

or fraudulent entry in any record; etc.

Clause 93 of the Bill lists certain grave acts which adversely affect the

integrity of the market which are categorised as market abuse such as engage in

insider trading, deal in securities while in possession of material or non-public

information, place any order in securities while directly or indirectly in possession

of information which is not publicly available, etc.

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Clause 94 of the Bill provides for imprisonment for a term which shall not be

less than one month but may extend to ten years or with fine of not less than ten lakh

rupees but may extend to twenty-five crore rupees or both, if a person fails to comply

with the interim order or the final order made under Chapter III.

Clause 95 of the Bill provides for the punishment for failure to comply with

the directions of the Investigating Officer.

Clause 96 of the Bill provides for the imprisonment for a term which shall not

be less than one month but may extend to ten years or with fine of not less than ten

lakh rupees but may extend to twenty-five crore rupees or both, if any person

contravenes, attempts to contravene, or abets the commission of market abuse.

Clause 97 of the Bill provides for the penalty for failure in obtaining

certificates of registration, failure to furnish correct information or documents, etc.

It further provides a monetary range for defaults or contraventions mentioned under

sections 97 to 102 and section 109, within which the adjudicating officer shall

impose an appropriate penalty while passing the final order for respective default or

contravention. It also provides that the minimum penalty amount that should be

imposed is fixed, the maximum penalty amount that can be imposed is linked to

unlawful gains made by the defaulter or contravener, or loss caused to an investor

or other persons and such quantification will depend on the facts and circumstances

of each matter, and the criteria and manner for quantifying unlawful gains and losses

will be specified in the regulations to ensure uniformity and certainty. It also

provides that in cases where the unlawful gains or losses caused are not quantifiable,

the maximum penalty amount is specifically provided.

Clause 98 of the Bill provides for the penalty for failure to invest the money

collected by a securities markets service provider. It further provides that person who

fails to comply with any provisions of this code, rules or regulations made thereunder or

directions issued by the board or the bye-laws of a market infrastructure institution.

Clause 99 of the Bill provides for the penalty for contravention by stock

brokers.

Clause 100 of the Bill provides for the penalty for failure to redress the

grievances of investors.

Clause 101 of the Bill provides for the penalty for failure to dematerialise

certificates of securities.

Clause 102 of the Bill provides for the penalty for failure to reconcile the

records of dematerialised securities with all the securities issued by the issuer as per

the regulations.

Clause 103 of the Bill provides for the penalty for other non-compliances. It

provides a higher monetary range for defaults or contraventions mentioned under

sections 103 to 108, within which the adjudicating officer shall impose an

appropriate penalty while passing the final order for the respective default or

contravention. It further provides that while the minimum penalty amount that

should be imposed is fixed, the maximum penalty amount that can be imposed is

linked to unlawful gains made by the defaulter or contravener, or loss caused to an

investor or other persons. It also provides that such the quantification will depend

on the facts and circumstances of each matter, and the criteria and manner for

quantifying unlawful gains and losses will be specified in the regulations to ensure

uniformity and certainty. It also provides that in case of these severe defaults or

contraventions; there may be circumstances where the quantifiable unlawful gains

or losses are relatively small. and the adjudicating officer may impose a higher

penalty. It also provides that in cases where the unlawful gains or losses caused are

not quantifiable, the maximum penalty amount is specifically provided.

Clause 104 of the Bill provides a penalty for failure of a market

infrastructure institution to conduct its business in accordance with the provisions

of this Code.

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Clause 105 of the Bill provides a penalty for failure to furnish periodical

returns, etc., by any market infrastructure institution or any self-regulatory

organisation.

Clause 106 of the Bill provides a penalty for failure to comply with orders of

an Ombudsperson.

Clause 107 of the Bill provides a penalty for default by persons managing a

pooled investment vehicle.

Clause 108 of the Bill provides for a penalty for dematerialisation of securities

in excess of the issued securities of a company or delivery of unlisted securities.

Clause 109 of the Bill is a residuary penalty provision for contraventions

where no separate penalty is provided under the Code.

Clause 110 of the Bill provides for the liability of certain persons where a

company commits a contravention, whether or not it results in a penalty or

punishment. It further clarifies the extent of liability for independent and

non-executive directors of a company in such circumstances and aligns it with the

Companies Act, 2013.

Clause 111 of the Bill specifies the additional factors for imposition of penalty

under sections 97 to 109. In addition to the factors mentioned in clause 19, the

adjudicating officer shall also take into account—(a) the amount required to be

disgorged and (b) any aggravating and mitigating circumstances. Disgorgement

restores the noticee to its pre-contravention position, while penalties are imposed to

ensure effective deterrence. When both actions are being undertaken, the

adjudicating officer will harmonise the total monetary liability to serve these distinct

objectives.

Clause 112 of the Bill provides for crediting all sums realised by way of

penalties by the Board to the Consolidated Fund of India.

Clause 113 of the Bill provides for the establishment or designation of Special

Courts for the trial of offences under the Code.

Clause 114 of the Bill provides for the appeals and revisions from the Special

Court to the High Court concerned.

Clause 115 of the Bill provides that subject to certain exceptions, the

provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 shall apply to the

proceedings before the Special Court.

Clause 116 of the Bill provides that a court can take cognizance of an offence

under the Code only upon written complaint made by the Board, or an officer or

person authorised by it.

Clause 117 of the Bill provides for the compounding of offences under the

Code by court or Tribunal, as the case may be. It provides that the offences under

the Code may be compounded by—(i) the Tribunal, either before or after the

proceedings related to such offences are instituted before the court, or (ii) the court,

before which such proceedings are pending. It further provides that a person cannot

apply for compounding of an offence committed by him within a period of three

years from the date on which a similar offence committed by him was compounded

under this section.

Clause 118 of the Bill provides for the manner in which other regulated

instruments would be issued or held through depositories. It further provides that

the Board may in consultation with other regulatory authority specify the conditions

and procedure of issuance and holding of other regulated instrument through

depositories.

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Clause 119 of the Bill provides for the manner of listing and trading of other

regulated instruments. It also provides that the other regulated instruments which is

listed on a stock exchange shall be listed, traded, cleared and settled in accordance

with the provisions of this Code and shall be subject to other conditions that are

specified by the Board in consultation with other regulated authority.

Clause 120 of the Bill enables the Board to enter into a memorandum of

understanding with other regulatory authority for various purposes.

Clause 121 of the Bill provides for the general conditions applicable on the

Board and other regulatory authority, while exercising their powers or

performing their functions under this Chapter such as to facilitate investor

participation, ensure investor protection, promote the orderly development of

securities markets, etc.

Clause 122 of the Bill empowers the Board to take action against a person who

are registered with other regulatory authority in case of contravention of the

provisions of the Code. It also provides that where the Board is of the opinion that

such person has contravened the provisions of the law under which it is registered,

it shall inform the concerned other regulatory authority about the contravention for

taking appropriate action.

Clause 123 of the Bill provides for grants by the Central Government to the

Board.

Clause 124 of the Bill provides that the General Fund, established under

section 14 of the Securities and Exchange Board of India Act, 1992, shall be deemed

to be the Fund for the purposes of the Code.

Clause 125 of the Bill provides that the Investor Protection and Education

Fund established under the Securities and Exchange Board of India (Investor

Protection and Education Fund) Regulations, 2009 shall be deemed to be the

Investor Protection and Education Fund for the purposes of the Code.

Clause 126 of the Bill provides for the Board to maintain accounts and audit

of the accounts by the Comptroller and Auditor-General of India.

Clause 127 of the Bill provides for furnishing of returns and reports by the

Board to the Central Government within the period of ninety days after the end of

each previous financial year. It also provides that a copy of the report shall be laid

before each House of Parliament.

Clause 128 of the Bill provides the establishment of a regulatory sandbox for

development of new products, contracts, or services in the securities markets.

Clause 129 of the Bill provides for the regulation of the National Institute of

Securities Markets for capacity building of intermediaries.

Clause 130 of the Bill provides that the Members, officers and employees of

the Board to be public servants.

Clause 131 of the Bill provides for the power of the Central Government to

issue directions to the Board.

Clause 132 of the Bill provides for the delegation of certain powers by the

Board except the powers under sections 128, 146 and 149.

Clause 133 of the Bill empowers the Central Government to supersede the

Board for the circumstances mentioned therein. It further empowers the Central

Government to take over all powers and functions of the Board on being superseded

which shall be exercised by such persons as the Central Government may direct. It

also empowers the Central Government to reconstitute the Board by fresh

appointment.

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Clause 134 of the Bill provides for the requirement to maintain confidentiality

of the regulatory data under the Code by the Board (its officers, employees)

and its Members, a market infrastructure institution and a self-regulatory

organisation (including their officers, employees and the members of their

governing boards).

Clause 135 of the Bill empowers the Central Government, on the

recommendation of the Board, to grant immunity to any person who is alleged to

have contravened the provision of this Code or rules, regulations or bye-laws made

thereunder subject to conditions mentioned therein.

Clause 136 of the Bill provides for the procedure for recovery of amounts in

case of failure by any person by various mode provided therein.

Clause 137 of the Bill provides for the continuance of proceedings under the

Code after the death of a person.

Clause 138 of the Bill provides for the bar of jurisdiction of courts in certain

cases in respect of quasi-judicial proceedings under the Code.

Clause 139 of the Bill provides for the protection from the legal proceeding to

the Central Government or any of its officers or the Board, any member of the Board

or its officers and employees for any action taken in good faith.

Clause 140 of the Bill provides for an exemption to Board from paying certain

taxes.

Clause 141 of the Bill provides that the power of the Board does not apply to

the International Financial Services Centre.

Clause 142 of the Bill provides provisions of this Code shall be in addition to,

and not in derogation of the provisions of any other law for the time being

in force.

Clause 143 of the Bill provides that the Code will not apply in certain cases.

Clause 144 of the Bill empowers the Central Government to delegate its

powers under the Code except the powers under sections 131,135 and 145.

Clause 145 of the Bill empowers the Central Government to make rules under

the Code for various provisions enumerated therein. It further provides that the

Central Government shall, before making any rules, comply with the condition of

previous publication. It also empowers the Central Government to dispense with the

requirements of previous publication in case of urgency in the public interest, for

reasons to be recorded in writing.

Clause 146 of the Bill provides for the power of the Board to make regulations.

In addition to the general powers of the Board to make regulations for carrying out

the purposes of this Code, this provision provides a list of subject matter for which

the specifications shall be through regulations.

Clause 147 of the Bill provides the procedure for issuing regulations by the

Board. The Board shall, before making a regulation, invite public comment on the

draft of the regulations. It further provides that the Board will provide an

appropriate, reasonable period for inviting public comments and will also give a

general statement of its response to the public comments. It also provides that this

requirement may be dispensed with in case of urgency in the public interest, for

reasons to be recorded in writing. It also provides that the Board shall periodically

review the regulations made by it.

Clause 148 of the Bill provides that the rules, regulations, bye-laws and

subsidiary instructions made under this Code be laid before the Parliament.

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Clause 149 of the Bill provides the manner of issuing subsidiary instructions

by the Board that clarify existing regulations or define the procedures ancillary to a

regulation. It further provides that a subsidiary instruction can be issued by—(i) the

Chairperson, individually or with a whole-time Member, or (ii) two whole-time

Members. It also provides that the Board will also specify the manner and conditions

for issuing subsidiary instructions.

Clause 150 of the Bill provides for the constitution of the Advisory

Committees by the Board. It further provides that the Board may consult the

Advisory Committee if it considers it necessary. It also provides that such

consultation or advice shall not be binding.

Clause 151 of the Bill empowers the Central Government by order to remove

difficulties that may arise in giving effect to the provisions of the Code. It further

provides that no order shall be made after the expiry of a period of three years.

Clause 152 of the Bill provides for the repeal and savings of the existing

enactments governing the securities markets and facilitates the transition from such

repealed enactments to the provisions of the Code.

Clause 153 of the Bill provides that any reference to repealed enactments to

be construed as a reference to the Code and the corresponding provisions.

Clause 154 of the Bill provides that the Economic Offences (Inapplicability

of Limitation) Act, 1974 be amended in the manner provided in the First Schedule

to align with the provisions of the Code.

Clause 155 of the Bill provides that the Prevention of Money-laundering

Act, 2002 be amended in the manner provided in the Second Schedule to align with

the provisions of the Code.

Clause 156 of the Bill provides that the Fugitive Economic Offenders

Act, 2018 shall be amended in the manner provided in the Third Schedule to align

with the provisions of the Code.

Clause 157 of the Bill provides that the Mediation Act, 2023 shall be amended

in the manner provided in the Fourth Schedule to align with the provisions of the

Code.

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MEMORANDUM REGARDING DELEGATED LEGISLATION

1. Sub-clause (1) of clause 145 of the Bill empowers the Central Government

to make rules for carrying out the provisions of the proposed legislation.

Sub-clause (2) of the said clause specifies the matters in respect of which such rules

may be made. These matters, inter alia, includes—

(a) the manner of appointment of Chairperson and Members under

sub-section (3) of section 4; (b) the other terms and conditions of service of

Chairperson and members under sub-section (3) of section 5; (c) the other

functions of the Board under clause (z) of sub-section (2) of section 11; (d) the

manner of crediting settlement amount to the Consolidated Fund of India

under sub-section (8) of section 26; (e) the salaries, allowances and conditions

of service of the officers and employees of the Tribunal under sub-section (3)

of section 84; (f) the form, manner and fee for filing an appeal under

sub-section (3) of section 85; (g) the other matters under clause (h) of

sub-section (2) of section 86; (h) the manner of crediting all sums realised by

way of penalty into Consolidated Fund of India under section 112; (i) the terms

and conditions and the sums payable under sub-section (1) of section 117; (j)

the form for maintaining proper accounts, other relevant records and the

preparation of annual statement of account along with the accounts of the

Investor Protection and Education Fund under sub-section (1) of section 126;

(k) the time, form and manner of furnishing returns, statements and particulars

in regard to any proposed or existing programme for the promotion and

development of securities markets under sub-section (1) of section 127; (l) the

form for submitting report, giving a true and full account of activities, policies

and programmes during the financial year under sub-section (2) of

section 127; (m) any matter which is to be or may be prescribed or in respect

of which provisions is to be made by rules.

2. Sub-clause (1) of clause 146 of the Bill empowers the Board to make

regulations for carrying out the provisions of the proposed legislation.

Sub-clause (2) of the said clause specifies the matters in respect of which such

regulations may be made. These matters, inter alia, includes—

(a) the other services for the purposes of the definition of depository

services under sub-clause (iv) of clause (l) of section 2; (b) the form of records

under clause (ze) of sub-section (1) of section 2; (c) the time and place, the

rules of procedure of transaction of business at the meetings of the Board,

including quorum and the manner of maintaining arrangements for recording,

safe-keeping and for taking decisions and publication thereof under

sub-section (1) of section 8; (d) such direct or indirect interest, including the

interest of any family member, under sub-section (4) of section 8; (e) the

qualifications, method of recruitment and the terms and conditions of service

of officers and employees of the Board under sub-section (2) of section 9;

(f) the manner for undertaking inspection of a securities markets service

provider, a market participant or any other person associated with the

securities markets under section 12; (g) the manner of seeking assistance by

the Board of a securities markets service provider or an expert to assist the

Investigating Officer under sub-section (1), the form of the order directing

investigation under sub-section (2), the criteria and manner of quantification

of unlawful gains or losses under sub-section (3) and the procedure of

conducting investigation under sub-section (5), of section 13; (h) the form and

manner of serving notice by the Investigating Officer under sub-section (6) of

section 14; (i) the rank of officer to be designated as an adjudicating officer

under sub-section (1) of section 17; (j) the manner for conducting adjudication

proceedings under sub-section (4) of section 17; (k) the relevant document and

particulars to be enclosed with a show cause notice under sub-section (1) of

section 18; (l) the procedure, the criteria for distribution of disgorged amount,

Sec. 2]

THE GAZETTE OF INDIA EXTRAORDINARY

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the order of priority and the other conditions to provide restitution from the

disgorged amount under sub-section (2) of section 25; (m) the conditions, the

fee, the time and manner of filing an application for settlement of proceedings

initiated or to be initiated under sub-section (1), the members, the terms and

conditions for constitution of committee for advising the Board under

sub-section (2), the other factors for settlement proceedings under sub-section

(3) and the manner for conducting settlement proceedings under sub-section

(6), of section 26; (n) the form and manner, the eligibility criteria and fee

payable and the period for rectification of the defects in the application for

registration under sub-section (2) and the form and manner, the terms and

conditions and the time period for issuing a certificate of registration and any

additional conditions under sub-section (3), of section 28; (o) the form and

manner and the conditions for surrendering the certificate of registration under

sub-section (1), and the period of suspension or cancellation of such certificate

and the other grounds for such suspension or cancellation under

sub-section (2), of section 29; (p) the class or classes of investors under

sub-section (1) of section 30; (q) the manner in which investment schemes

shall be conducted, operated or promoted including the matters related to

contribution or subscription made by an investor under sub-section (3) or

section 32; (r) the manner of investment of funds raised or collected under

sub-section (1), and the manner and extent of borrowing and issuing debt

securities by pooled investment vehicles under sub-section (2), of section 33;

(s) the manner of facilitating or providing services related to the issue, sale,

purchase or any such dealings in securities under sub-section (1), and the

manner and the period within which to charge brokerage, deliver securities

and make payment to an investor under sub-sections (2), of section 34; (t) the

fair disclosure of information and the frequency thereof under sub-section (1)

and, the manner of furnishing information by a securities markets service

provider, market participant or a person associated with securities markets

under sub-section (2), of section 35; (u) the manner and the period to invest

money by a securities markets service provider under sub-section (3) of

section 35; (v) the form, manner and fee for registration as a market

infrastructure institution under sub-section (2) and, the conditions for the

bye-laws of the applicant, the form and other conditions for grant of

registration to the applicant and the period for rectification of defects in the

application for registration under sub-section (3), of section 37; (w) the manner

in which the Board may order to cancel the certificate of registration of market

infrastructure institutions under sub-section (1) of section 38; (x) such other

matters under clause (u) of sub-section (2) of section 39; (y) the mechanisms

under sub-section (2) of section 41; (z) the conditions under sub-section (1) of

section 42; (za) the manner of management of the board of market

infrastructure institution under sub-section (2) and the manner of

demutualisation of market infrastructure institution under sub-section (3) of

section 42; (zb) the manner of furnishing annual report and other information

by market infrastructure institution to the Board under section 43; (zc) the

manner of being admitted as member or client of member or principal under

sub-section (1) of section 52; (zd) the conditions and procedures for issuance

and holding of other regulated instrument through depositories under

clause (b) of sub-section (1) of section 54; (ze) the manner of surrender of

certificate of security or other regulated instrument under sub-section (1), the

time period for completion of the process of dematerialisation and informing

the depository under sub-section (2), and the period for dematerialisation of

the certificate of securities under sub-section (4), of section 56; (zf) the other

particulars to be maintained by depository under section 57; (zg) the rights and

obligations of depositories, depository participants and issuers under

sub-section (1), the eligibility criteria for admission of securities or other regulated

THE GAZETTE OF INDIA EXTRAORDINARY

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instrument on depositories and the manner of holding or transfer of such

securities and other regulated instrument under sub-section (2), the manner of

exercising the rights and interest and any other operational or incidental

matters under sub-section (3), the manner of maintaining records by a

depository under sub-section (4), and the procedures and good practices under

sub-section (5), of section 62; (zh) the eligibility criteria and requirements for

securities to be offered to public and listed on stock exchange under

sub-section (1), the conditions to be complied by every issuer intending to

offer securities to the public or for listing under sub-section (2), the other

conditions where securities are listed on stock exchange under sub-section (3)

and the time period and manner in respect of repayment of all money under

sub-section (4), of section 64; (zi) the requirements and other matters under

sub- section (1) of section 65; (zj) the manner of delisting of securities by stock

exchange under sub-sections (1) and the grounds for such delisting under

sub-section (2), of section 66; (zk) the form and manner for implementing the

delivery arrangements by a market infrastructure institution under section 69;

(zl) the manner of making the investor charter and such other matters

concerning the investors under section 71; (zm) the manner and the period for

receiving, monitoring and redressing investor grievance under sub-section (1)

and the period for informing the investor under sub-section (2), of section 72;

(zn) the manner and timelines for the grievance redressal under sub-section (3)

of section 73; (zo) the form and manner of filing a complaint to an

Ombudsperson under sub-section (2) of section 74; (zp) the amount to be paid

to the complainant as damages under clause (c) of sub-section (1) of

section 75; (zq) the other fraudulent or unfair practices in the securities

markets under clause (f) of section 92; (zr) the other activities which adversely

affects the integrity of the securities markets under clause (g) of section 93;

(zs) the conditions and procedures relating to the issuance and the manner of

holding of other regulated instrument through depositories under

sub-section (2) of section 118; (zt) the other conditions for listing, trading,

clearance and settlement of other regulated instrument on a stock exchange

under sub-section (2) of section 119; (zu) the grants and donations to other

persons under clause (b) of sub-section (1) and the manner of administration

and utilisation of the Investor Protection and Education Fund under

sub-section (2), of section 125; (zv) the manner of establishing a regulatory

sandbox under sub-section (1) and the conditions and procedure for making

an application under clause (c) of sub-section (3), of section 128; (zw) the

manner

and

conditions

issuing

subsidiary

instructions

under

sub-section (1) of section 149; (zx) the manner of the constitution of Advisory

Committees under section 150; (zy) such other matter which is required to be,

or may be, specified by regulations or in respect of which provision is to be

made by regulations.

3. Sub-clause (1) of clause 39 of the Bill empowers a market infrastructure

institution to make bye-laws for carrying out the provisions of the proposed

legislation. Sub-clause (2) of the said clause enumerates the matters in respect of

which such bye-laws may be made which includes—

(a) the appropriate mechanisms for safeguarding the interests of any

investors in securities and beneficial owners thereof; (b) the manner of

holding, custody, pledging, hypothecation, lending, borrowing, issue, transfer,

trading, transmission, conversion, transformation, consolidation, switching,

clearing, delivery, settlement and other dealings in securities; (c) the risk

management and abuse prevention measures such as imposition of margins,

position and price limits, circuit breakers, collateral management, auction of

short positions, order restrictions, account suspensions, server placement and

Sec. 2]

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other technical requirements; (d) the particular bye-laws, the contravention of

which shall make a contract entered into otherwise than in accordance with

the bye-laws void under section 47; (e) the terms and conditions for accessing

any services provided by the market infrastructure institution; (f) the listing of

securities, the inclusion of any security for the purpose of dealings and the

suspension or withdrawal of any such securities, and the suspension or

prohibition of trading in securities; (g) the procedure for disbursing of interest,

dividend, bonus and other monetary benefits arising from the holding, transfer,

or any dealings in securities; (h) the norms of fair and time-bound disclosure

of material information by issuers; (i) the internal control standards such as

audits, review and monitoring; (j) the inter-se rights and obligations of

members and market participants; (k) the terms, conditions and incidents of

contracts, including the prescription of margin requirements, if any, and the

conditions relating thereto, and the forms of contracts in writing; (l) the

content, form and manner of executing member-client agreements; (m) the

measures relating to regulation of fees charged by members, dealings by

members for their own account, maintenance of separation of client funds and

securities; (n) the process of accrediting or empanelling persons providing

services in connection with any dealings in securities; (o) the procedure for

conveying information to members and market participants; (p) the levy and

recovery of fees and penalties; (q) the conduct of inspections, filing of

information and such other matters in relation to regulation of its members;

(r) the obligations of members to supply such information or explanation and

to produce such documents relating to their business as may be sought by the

market infrastructure institution; (s) the procedure for the settlement of claims

or disputes or grievances including settlement by mediation or arbitration

including through electronic means; (t) the manner of conducting proceedings

against the members and market participants for committing breach of the

bye-laws and provisions for suspension, expulsion of members and market

participants and cancellation of agreements with the market infrastructure

institution; (u) other matters as may be specified by regulations;

(w) sub-section (5) of section 39 empowers the Board to make bye-laws over

the matter enumerated under sub-section (2) thereof.

4. The matters in respect of which rules, regulations, subsidiary instructions

or bye-laws, may be made or issued under the aforesaid provisions are matters of

procedure and administrative detail and it is not practicable to provide for them in

the Bill itself. The delegation of legislative power is, therefore, of a normal

character.

————

UTPAL KUMAR SINGH

Secretary General

MGIPMRND—398GI(S4)—01-01-2026.

UPLOADED BY THE MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI–110002

AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS, DELHI–110054.

THE GAZETTE OF INDIA EXTRAORDINARY

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KSHITIZ

MOHAN

Digitally signed

by KSHITIZ

MOHAN

Date: 2026.01.01

11:11:37 +05'30'