Par Panel recommends 2 yrs cooling-off period for Chairperson, Whole Time Members of SEBI

A Parliamentary Panel on Thursday recommended cooling off period of 2 years for Chairperson and wholetime members of Securities and Exchange Board of India (SEBI). It also urged the government to examine the need for an appropriate statutory and regulatory framework for Virtual Digital Assets, better known as crypto.

All these are part of the report on ‘The Securities Markets Code, 2025’, which was referred to the Standing Committee on Finance, chaired by Bhartruhari Mahtab. Though the recommendations of the committee is not binding on the government, still going by the submission by government officials before the Committee, some recommendations are expected to be included in the revised bill. Then it will be taken to the Cabinet before moving to the Parliament for consideration and passage. There is the possibility of bill to be taken up during the ongoing session of the Parliament.

The bill prescribes cooling off period of one year. However, the Committee was of the considered view that the SEBI occupies a unique position as the principal regulator of the securities market, exercising wide-ranging regulatory, supervisory, investigative and enforcement powers over market participants. “Given the nature of these functions and the sensitivity of the information available to the Chairperson and Whole-time Members during their tenure, a longer cooling-off period would provide a stronger institutional safeguard against actual or perceived conflicts of interest, enhance public confidence in the independence and impartiality of the regulator, and reinforce the credibility of the regulatory framework” It said.

Accordingly, it recommended related clause in the bill to be suitably amended to provide for a cooling-off period of two years, in place of one year, before the Chairperson and Whole-time Members may accept employment or any appointment with a securities markets service provider, market participant or any other person associated with the securities markets.

Virtual Digital Asset

Meanwhile, the Committee noted that the proposed Code adopts a technology-neutral definition of securities, however, it excluded Virtual Digital Assets (VDAs) that do not satisfy the legal characteristics of securities or derivatives under the proposed framework. It also found that although many categories of VDAs are increasingly traded and invested in as financial assets and exhibit characteristics commonly associated with securities and derivatives such as investment for financial returns, tradability on organised platforms, price discovery through market forces, speculative trading, leverage, and, in certain cases, exposure to the value or performance of an underlying asset or index they are not expressly recognised or regulated under the proposed Code unless they independently satisfy the statutory definition of a security or derivative.

“In view of the rapid growth of the VDA ecosystem and increasing retail participation, the Committee is of the view that this exclusion creates a regulatory grey area, resulting in regulatory uncertainty, exposing investors to heightened risks of fraud, market manipulation, misrepresentation and inadequate grievance redressal, while also creating opportunities for regulatory arbitrage. Such uncertainty may adversely affect investor confidence and undermine the integrity, transparency and orderly development of the securities market,” it said.

Accordingly, it recommended that the Government comprehensively examine the need for an appropriate statutory and regulatory framework for Virtual Digital Assets. “Pending the establishment of a comprehensive legislative framework, the Government may consider introducing an interim regulatory mechanism through recognised Self-Regulatory Organisations (SROs) operating under the oversight of the designated regulator,” it said.

Further, such a framework should prescribe minimum standards of governance, transparency, disclosure, investor protection, grievance redressal, compliance with prescribed codes of conduct and appropriate regulatory oversight, to mitigate risks arising from the existing regulatory vacuum while promoting market discipline and safeguarding investor interests, it said.

Published on July 23, 2026