The Congress Party through its spokesperson Pawan Khera held a press conference today providing details of how, Madhabi Puri Buch, chairperson of the Securities and Exchange Board of India (SEBI) had continued to earn income from the ICICI group.
The Party claims that this is only the first of its revelations and has, as a first step, demanded answers from SEBI and the appointments committee of the Cabinet (ACC) which is responsible for her appointment.
The Congress has alleged that between 2017 and 2024, Buch earned a hefty Rs16.80 crore (approximately US$2.1mn—million) from ICICI group in the form of salary, income from ICICI Prudential, employee stock ownership plan (ESOP) proceeds, and the group even paid the tax deducted at source (TDS) on these earnings. Ms Puri Buch was appointed whole-time Member (WTM) of SEBI on 5 April 2017 and elevated as chairperson on 2 March 2022. The earnings, says the Congress, had continued during this time. The amount earned, is allegedly 5.09 times the income of Rs3.30 crore that Ms Buch earned at SEBI during the same period. Another curious detail, put out by the Congress is that a year before joining SEBI, Ms Buch′s income from ICICI Bank stood at Rs1.12 crore but it increased exponentially over the years.
The press release alleges several violations of SEBI's regulations and codes of conduct committed by Ms Buch's actions:
1. Receipt of salary from ICICI Prudential as a SEBI member and holding an office of profit violates Section 54 of the SEBI (Employees' Service) Regulations, 2001, and Section 5 of SEBI's Code on Conflict of Interest for Board Members (2008).
2. Receipt of income from ICICI Bank's ESOPs as a SEBI member violates Section X of the ICICI Employee Stock Option Scheme.
3. Receipt of TDS on ESOPs from ICICI Bank as a SEBI member violates SEBI's Code of Conduct on Conflict of Interest for Members of the Board (2008).
The Congress claimed that this is only the first phase of its revelations and a lot more will be revealed gradually, including earnings of people close to the chairperson. It went on to pose the following questions:
1. Where has ICICI Bank declared the salary and ESOP benefits paid to the incumbent SEBI chairperson?
2. Why did ICICI Bank pay salary to the SEBI chairperson after she had joined SEBI as a WTM?
3. Why did ICICI Bank bypass its ESOP rules and grant benefits to the SEBI chairperson?
4. Are there any other arrangements between the SEBI chairperson or her family.
These allegations are way beyond the whistle-blower documents released by Hindenburg Research on 10th August. Only last week, The Scroll quoted a SEBI board member (who chose to remain unnamed) as saying that the SEBI chairperson “did not recuse herself from the market regulator’s investigation into alleged stock manipulation by the Adani Group.”
While Ms Puri Buch appeared to have weathered the storm of extremely controversial revelations when she addressed a global tech conference last week, the new charges have once again turned thrown the capital market regulator into a turmoil. It also appears that new charges will be made in the coming days.
Moneylife checked with SEBI and ICICI Bank if they planned to respond to the Congress Party’s charges.
In response to these allegations, ICICI Bank has issued a clarification statement though exchange communication addressing several key points. The bank asserts that neither it nor its group companies have paid any salary to Ms. Buch after her retirement, aside from her retiral benefits. They note that Buch opted for superannuation effective 31 October 2013.
ICICI Bank explains that while employed by the ICICI Group, Buch received standard compensation including salary, retiral benefits, bonuses, and ESOPs, in line with applicable policies. Regarding the ESOP issue, the bank clarifies that under its rules, options vest over several years from the date of allotment, and at the time of Buch's grants, employees (including retirees) could exercise their ESOPs up to 10 years from the vesting date.
The bank also addresses the tax implications, stating that as per Income Tax rules, the difference between the stock price on the exercise date and the allotment price is treated as perquisite income, reflected in Form-16 for both current and retired employees, with the bank required to deduct perquisite tax. ICICI Bank emphasizes that all payments made to Buch after her retirement had accrued during her employment with ICICI Group, consisting of ESOPs and retiral benefits.
This controversy highlights the complex relationships between private sector entities and regulatory bodies in India's financial sector. While ICICI Bank's clarification addresses some of the concerns raised, questions remain about the potential for conflicts of interest when regulatory officials maintain financial ties to institutions they may be tasked with overseeing. As the situation continues to develop, there are calls for greater transparency in the appointment and oversight of regulatory officials, as well as clearer guidelines on how to manage potential conflicts of interest in these critical roles. The ongoing debate underscores the need for a careful balance between leveraging private sector expertise in regulatory roles and maintaining the independence and integrity of financial oversight bodies.
The disturbing fact here is that she had an equity exposure in the ICICI Group while she was a SEBI Member. This raises the matter of conflict of interest.
In 2019 Bloomberg reported that Parmit Jhaveri of Citibank was denied an extension as the CEO due to concerns about his personal investments. Definitely a SEBI Chief will have to be held to higher standards and would not be sitting on cases where she is materially invested.
https://www.bloomberg.com/news/articles/2019-02-14/citigroup-india-ceo-said-to-fall-afoul-of-nation-s-central-bank
When above kind of person was not taken to task and wrestlers continuously troubled by fake news, IT misinformation on them and also taking back security of witnesses etc. and court has to force them to give security back?
How will Shansha act on conflict of interest when he does not even act against criminals?