Capital Markets are an important mobilizer of resources for the corporate sector. Investors' confidence is key to the healthy developments of capital markets, it is necessary that comprehensive and adequate laws exists to regulate security industry to protect investors interests and rights. The laws should also provide for an effective nodal regulatory agency to ensure fair play, discipline and integrity in the investment business. The paper review the current problems in working of the Indian capital markets and implementation of the security regulations. It suggests measures to improve efficiency of the markets, proposes a comprehensive regulatory framework and outlines the nature of implementing authorities. Further, it recommends a nodal regulatory authority independent of government interference which would be responsible for implementing the legislation. This agency would need to develop itself as a viable entity with its own infrastructure, trained manpower and professional work culture. For investors' protection, some additional measures like frequent disclosure of reliable information, creation of Investors Protection Fund, setting up of Investors Protection Advisory Council and promotion of local Investors' Associations are suggested. For quick redressal of grievances, an independent quasi-judiciary machinery is proposed. Since an individual investor is unable to take action because of disproportionate expenses involved in initiating the action, the laws should also provide for public interest litigation by investors association and other agencies on behalf of investors.