Responding to the allegations made by US-based short-seller Hindenburg Research, market regulator Securities and Exchange Board of India (SEBI) says it has completed all but one investigation into allegations against the Adani group. Commenting on the allegations about its chairperson Madhabi Puri Buch investing in funds at the heart of the probe, SEBI says it has adequate internal mechanisms for addressing issues relating to conflict of interest which include a disclosure framework and provision for recusal.
On Saturday, Hindenburg alleged that the SEBI chairperson had a stake in obscure offshore entities used in the Adani money siphoning scandal. Ms Buch, however, 'strongly' denied the 'baseless' allegations and insinuations made in the (Hindenburg) report.
In a statement, SEBI says, "It is noted that relevant disclosures required in terms of holdings of securities and their transfers have been made by the chairperson from time to time. The chairperson has also recused herself in matters involving potential conflicts of interest. SEBI, over the years, has built a robust regulatory framework that not only aligns with best global practices but also ensures protection of investors."
"Investors should remain calm and exercise due diligence before reacting to such reports. Investors may also like to take note of the disclaimer in the report that states that readers should assume that Hindenburg Research may have short positions in the securities covered in the report," the market regulator says.
Quoting
whistle-blower documents, Hindenburg says, "We had previously noted Adani's total confidence in continuing to operate without the risk of serious regulatory intervention, suggesting that this may be explained through Adani's relationship with SEBI chairperson, Madhabi Buch. Whistleblower documents show that Ms Buch, the current chairperson of SEBI, and her husband had stakes in both obscure offshore funds used in the Adani money siphoning scandal."
Quoting media reports about Adani group chief Gautam Adani's meeting with the SEBI chief, Hindenburg says, "What we had not realised: the current SEBI chairperson and her husband, Dhaval Buch, had hidden stakes in the exact same obscure offshore Bermuda and Mauritius funds, found in the same complex nested structure, used by Vinod Adani."
SEBI, however, says the allegations made by Hindenburg Research against the Adani group, have been duly investigated.
On 3 January 2024, the Supreme Court noted that SEBI had completed 22 out of 24 investigations into the Adani group. Subsequently, SEBI says one more investigation was completed in March 2024, and one remaining investigation is close to completion. "During the ongoing investigation in this matter, more than 100 summons, around 1,100 letters and emails have been issued to seek information. Further, more than 100 communications have been made seeking assistance from domestic and foreign regulators and external agencies. Also, more than 300 documents containing around 12,000 pages have been examined."
Last month, the US-based short-seller made public the show-cause notice (SCN) it received from SEBI, calling the SCN "an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India."
Responding the SCN issue, SEBI says the notice, alleging violations of securities laws by Hindenburg Research, has been issued by following the due process of the law. "It is noted that Hindenburg Research has itself made the SCN issued to it available on its website. The SCN contains the reasons for its issuance. The proceedings in this matter are ongoing and the same is being dealt with in accordance with the established procedure and in compliance with the principles of natural justice."
Hindenburg also alleged that the implementation of the SEBI Real Estate Investment Trusts (REIT) Regulations 2014, as well as changes in such regulations, had resulted in significant benefits to a large multinational financial conglomerate.
SEBI says, "As with all cases involving the introduction of a new regulation or amendment to an existing regulation, a robust consultation process for seeking inputs and feedback of the industry, investors, intermediaries, relevant advisory committee and the public at large is in place. Only after consultation, a proposal for the introduction of a new regulation or change in the existing regulation is placed for the consideration of and deliberation of the SEBI board. Regulations are notified after approval of the SEBI board. As a measure of transparency, the agenda papers for board meetings and outcomes of board discussions are also published on SEBI website. Hence, claims that such regulations, changes to regulations or circulars issued related to REITs were to favour one large multinational financial conglomerate, are inappropriate."
"For the development of the Indian securities market, SEBI has at various times underscored the potential of REITs, small and medium (SM) REITs, infrastructure investment trusts (InvITs) and municipal bonds amongst other asset classes for the democratisation of markets, financialisation of household savings and for capital formation through the capital markets. These are also highlighted in the latest SEBI annual report as part of the chairperson's statement. Therefore, the claim that promoting REITs and SM REITs among various other asset classes by SEBI was only for benefitting one large multinational financial conglomerate is inappropriate," the market regulator says.
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