Dr. M. S. Sahoo and Mr. Sumit Agrawal in an article titled “One Code to Discipline Them All” published in The New Indian Express have analysed the proposed Securities Markets Code (SMC) and the significant shift it seeks to introduce in the securities enforcement architecture.
The proposed SMC seeks to consolidate the existing parallel enforcement mechanisms under securities laws into a unified adjudicatory framework. Under the present regime, Securities and Exchange Board of India (SEBI) may simultaneously initiate proceedings under Section 11B of the SEBI Act, enquiry proceedings under the Intermediaries Regulations, and adjudication proceedings for monetary penalties. While legally independent, these proceedings often arise from the same factual matrix and may lead to overlapping or inconsistent outcomes.
The authors note that the proposed framework rationalises this structure by enabling a single adjudicating authority to first determine the contravention and thereafter impose appropriate regulatory consequences after considering factors such as intent, duration, investor harm, unlawful gains and market impact.
However, the article also flags important institutional and jurisprudential concerns. The proposed framework may substantially widen enforcement discretion by permitting a broad range of remedies (including suspension or cancellation of registration, monetary penalties, disgorgement, cease-and-desist directions and other market-access restraints) without laying down a sufficiently structured framework indicating when one remedy should be preferred over another or when multiple remedies may be simultaneously justified.
The article further cautions that permitting adjudicatory procedures to be prescribed through Securities and Exchange Board of India (SEBI) regulations, instead of government-framed rules, may blur the institutional distinction between rule-making and enforcement.
The authors suggest that while regulatory discretion is indispensable in modern securities regulation, such discretion must be meaningfully structured to ensure consistency, predictability and institutional credibility in enforcement outcomes.
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