In a report released by the US-based Hindenburg Research claimed that the Sebi Chairperson Madhabi Puri Buch and her spouse “had a stake in obscure offshore entities used in the Adani money siphoning scandal.”
It said it was massive Conflict of Interests.
These alleged breaches relate to non-compliance on maintaining records of clients and transactions, accounting and auditing standards; safeguards against dummy officers; corporate governance and the prescribed internal mechanism to identify risks of money laundering.
SEBI Chief Statement:
Madhabi Puri(SEBI Chief)in a statement issued jointly with her husband she said:
“Sebi has strong institutional mechanisms of disclosure and recusal norms as per the code of conduct applicable to its officers. Accordingly, all disclosures and recusals have been diligently followed, including disclosures of all securities held or subsequently transferred.”
She further said that “Hindenburg has been served a show cause notice for a variety of violations in India. It is unfortunate that instead of replying to the Show Cause Notice, they have chosen to attack the credibility of the Sebi and attempt character assassination of the Sebi Chairperson.”
SEBI’S Stance on Allegations:
-SEBI denied the allegations that it had not taken any action against the Adani Group and made changes in the SEBI (REIT) Regulations, 2014 to benefit Blackstone.
–It said “claims that such regulations, changes to regulations or circulars issued related to REITs were to favour one large multinational financial conglomerate, are inappropriate.”
–On the Hindenburg report seeking to question SEBI’s action in issuing a show-cause notice to it on June 27, 2024, SEBI said: “The show-cause notice in question, alleging violations of securities laws by Hindenburg Research, has been issued by following the due process of the law.”
-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,” it added.
Hindenburg’s reply :
-Reacting to the Buchs’ rebuttal of their report red-flagging their investments in obscure offshore funds linked to the Adani Group and ownership of consulting firms in Singapore and India, Hindenburg Research in a series of posts on X said the clarification contains several important “admissions”, raises fresh questions and confirms a “massive conflict of interest”.
-On Ms. Buch’s remarks that her husband used the consulting entities, starting in 2019 to transact with unnamed “prominent clients in the Indian industry”, Hindenburg asked if these included clients SEBI is tasked with regulating.
-Pointing to the promise of a “commitment to complete transparency” in the statement, Hindenburg Research asked if she will publicly release the “full list of consulting clients and details of the engagements, both through the offshore Singaporean consulting firm, the Indian consulting firm and any other entity she or her husband may have an interest in”.
_________________________________________
Structural Organisation of SEBI:
SEBI is an autonomous organization that works under the administration of the Union Finance Ministry. The Security and Exchange Board of India (SEBI) is managed by the following members:
-The chairman is nominated by the Union Government of India.
Two members, i.e., Officers from the Union Finance Ministry.
One member from the Reserve Bank of India.
-The remaining five members are nominated by the Union Government of India. Three of the five members should be full-time members.
-Ms Madhabi Puri Buch is the current SEBI Chairman who was appointed to take charge of the chairman’s office on 02 March 2022, by replacing the former chairman Ajay Tyagi.
Code on Conflict of Interests for Members of Board (SEBI):
(1) A Member shall take all steps necessary to ensure that any conflict of
interests to which he may be subject to does not affect any decision of the Board.
(2) A Member shall disclose his interests which may conflict with his duties.
(3) A Member shall not exploit to his personal advantage, any personal or
professional relationship with regulated entities or any employee of such entities.
About Hindenburg:
1.Hindenburg is an institute specialising in “forensic financial research”. In other words, it looks for corruption or fraud in the business world, such as accounting irregularities and bad actors in management.
2.Hindenburg, a US-based investment research firm, specialises in activist short-selling.
3.Hindenburg Research was founded in 2017 by Nate Anderson, a chartered financial analyst and a chartered alternative investment analyst.