Editorial: Cloud over Madhabi Buch

For several months now, Madhabi Puri Buch, chairperson of the Securities Exchange Board of India (SEBI), has been under a cloud of corruption. She denied the first flurry of allegations against her. Then, to the subsequent welter of charges, she has adopted an attitude of stony silence. The response of the BJP-led government has been no different. As a result, the country’s markets regulator now operates in a state of flux: its authority to police equity fraud stands compromised and its mandate to protect the people’s interest has been betrayed.

It has been over a month since Hindenburg Research alleged Buch and her husband were investors in the offshore fund used to channel monies into the Adani Group companies, which are under investigation by SEBI. Further, throughout her time on the SEBI board, she continued to own an active consultancy that had links to individuals who had been Adani employees. She also has been promoting real estate investment trusts (REITs) while her husband was in the employ of Blackstone, a global realty leviathan.

Buch’s claim of having recused herself from matters involving potential conflict of interest, such as the Adani investigation or REITs issues, are not convincing, especially since that same privilege of remaining in the vicinity while her subordinates carry out their work is not available to any of her colleagues.

Moreover, the Congress has leveled several more allegations against her. Throughout her service in SEBI, first as a whole-time member and then as chairperson, she has received payments from her former employer, ICICI Bank. The party claims that she received a total of Rs 16.8 crore from ICICI Bank since joining SEBI in 2017. The bank has explained on her behalf that these were retirement benefits or stock option redemptions but doubts persist why such benefits were paid not in lumpsum but in monthly tranches over years.

Whatever the nature of these payments, or even if they were kosher, they do bring up the question of conflict of interest, or at least of propriety. Should the SEBI chief have kept her stock options from ICICI Bank while she could probably have been privy to price-sensitive information relating to the company? Similarly, another of the Congress party’s allegations against Buch relate to rental income she received from a company associated with Wockhardt Ltd, which is under SEBI investigation for insider trading. The party says this arrangement too constitutes a conflict of interest and violates SEBI's code of conduct.

The pressure on the SEBI chairperson is likely to intensify when she is summoned by the Public Accounts Committee (PAC) of Parliament, which has pledged to review the performance of India’s regulatory bodies, including SEBI. The PAC, chaired by Congress MP KC Venugopal, is likely to scrutinise the allegations of conflict of interest against Buch, particularly in light of the ongoing investigation into the Adani Group.

The crux of the matter is not whether all of Buch’s deeds and associations meet the test of legality. Do they measure up to the standards of transparency we expect from our regulators? Can SEBI justly hold listed companies to an exacting measure of market fidelity while its own top officials plead the benefit of doubt? It is for a purpose that standards are more stringent for referees. It vests them with the authority to hold players to a high level of conduct. That’s why we have regulators.