New Delhi: The Securities Markets Code (SMC) Bill draws a clear line on capital markets regulator Sebi's enforcement reach by imposing an eight-year statutory limit on inspections and investigations, a move aimed at preventing prolonged regulatory overhang on market participants. However, this eight-year limitation will not apply to cases that have a systemic impact on the securities market.

Apart from setting a time bar, the Bill also introduced a time-bound enforcement framework. It mandates Sebi to complete investigations within 180 days, while simultaneously strengthening investor protection through the introduction of an Ombudsperson-led grievance redressal mechanism.

The Bill, which was introduced in the Lok Sabha last week, requires Sebi to set aside 25 per cent of its annual surplus in a Reserve Fund for expenses, with the remaining surplus transferred to the Consolidated Fund of India.

According to a person familiar with the matter, the eight-year limit would bring legal certainty and finality to past transactions, ensuring that entities are not "haunted indefinitely" by old cases. "The provision is aimed at providing greater legal certainty to market participants, primarily in light of instances where regulatory matters have remained unresolved for years, creating prolonged uncertainty for entities," the person added. At the same time, changes related to time-bound completion of investigation and ombudsman concept are expected to place additional manpower demands on the regulator. Sebi will need to undertake capacity building and deploy adequately trained resources to implement the expanded framework effectively, the person said.