India has evolved from a lightly controlled securities market to essentially one of structured and well-regulated markets. The work explores the history, development, and, most importantly, the reforms of the securities laws in India through historical sources (e.g., economic shifts), landmark laws (reformulation), and institutional formation (financial irregularities).
1. Introduction
The development of securities law in India is a critical part of the nation’s journey toward building a transparent, efficient, and investor-friendly capital market. From unregulated stock exchanges in the early 20th century to the sophisticated regulatory environment led by SEBI today, the transformation has been profound and far-reaching.
2. Pre-SEBI Era: Initial Framework
Before 1992, India’s securities market was largely unregulated. The Capital Issues (Control) Act, 1947 governed capital raising but lacked provisions for market conduct or investor protection. Stock exchanges functioned with minimal oversight, and fraudulent practices were not uncommon. The Controller of Capital Issues (CCI) had authority over public offerings, but the market suffered from weak governance and investor mistrust.
3. Establishment of SEBI
The real turning point came in 1992 when the Securities and Exchange Board of India (SEBI) was granted statutory powers through the SEBI Act, 1992. SEBI became the principal regulator for the securities market in India, tasked with protecting investor interests, promoting market development, and regulating intermediaries.
4. Key Milestones in SEBI’s Evolution
- 1995: SEBI introduced the Disclosure and Investor Protection Guidelines.
- 2000: Shifted to an online trading system (NSE & BSE), enhancing transparency.
- 2002: Implemented the T+2 settlement cycle.
- 2015: Launched the Listing Obligations and Disclosure Requirements (LODR) Regulations.
- 2021 onwards: SEBI tightened norms around IPO pricing, insider trading, and ESG disclosures.
5. Major Securities Law Reforms
Over the years, India’s securities laws have expanded to include:
- SEBI Act, 1992
- Depositories Act, 1996
- Securities Contracts (Regulation) Act, 1956
- Companies Act, 2013 (relevant sections on securities)
These reforms led to mandatory dematerialization of shares, better corporate governance norms, registration of market intermediaries, and stricter penalties for fraud and insider trading.
6. Impact on Investors and Market Transparency
With robust legal and regulatory frameworks, the Indian securities market has become more stable and attractive to both domestic and foreign investors. SEBI’s emphasis on disclosure, fair trade practices, and grievance redressal mechanisms has increased retail participation and restored public confidence in the markets.
7. Recent Developments and Challenges
In recent years, SEBI has focused on:
- Regulating fintech platforms
- Enhancing cybersecurity for exchanges
- Introducing frameworks for REITs, InvITs, and social stock exchanges
Despite progress, challenges remain such as:
- Balancing innovation with regulation
- Preventing algorithmic trading abuses
- Ensuring speedy enforcement actions
8. Conclusion
India’s journey in developing securities laws reflects its broader economic evolution—from state-controlled finance to liberalized markets. SEBI has played a pivotal role in shaping a trustworthy and dynamic securities market. However, continuous innovation and vigilance are essential to adapt to changing technologies and global financial trends.