Editorial: Cloud over SEBI probe

Less than three months into its NDA avatar, the Modi regime is finding that it will not have the honeymoon period new governments are allowed to enjoy, but will be hounded to explain the albatrosses it is carrying over from its late, little-lamented majoritarian rule. The biggest of these burdens is its ties to the Adani Group, which has only gotten bigger with the latest revelations by Hindenburg Research.

Crucially, the US-based short-seller’s expose on Saturday puts a huge question mark against the personal integrity of Madhabi Puri Buch, chairperson of the Securities Exchange Board of India (SEBI), the stock market regulator which ought to have carried out, but did not, a stringent investigation into the share-price rigging and money-laundering allegations levelled by Hindenburg against the Adani Group last year.

Much as the Adanis might claim, there never was a clean chit given to the mysterious monies that flowed into their companies from offshore funds having questionable governance creds and based in high-risk parking lots like Mauritius, Dubai and Bermuda. The Supreme Court, unfortunately, did not allow the probe to be transferred to either the CBI or the Enforcement Directorate, although money-laundering falls within their mandate. Instead, it found it fitter to let SEBI, led by Ms Buch, carry out its regulatory investigation, ignoring the May 2023 report of its own Expert Committee that SEBI had “drawn a blank” in its probe.

Given that context, the allegations contained in the latest Hindenburg report throw up ‘conflict of interest’ questions against Ms Buch herself and cast doubts on her agency’s mealy-mouthed investigation. Ms Buch and her husband Dhaval Buch are accused of having stakes in the very same offshore funds that were used by mysterious investors, including Gautam Adani’s elusive brother Vinod, to pump money of unknown origins into six Adani Group companies.

Hindenburg alleges that “despite the existence of thousands of mainstream, reputable onshore Indian mutual fund products, an industry she is responsible for regulating,” Ms Buch and her husband chose to have “stakes in a multi-layered offshore fund with minuscule assets, traversing known high-risk jurisdictions, … and significantly used by Vinod Adani….”

Apart from the obvious ‘conflict of interest’ question this raises, the latest Hindenburg report alleges that Ms Buch and her husband tried to mask her stake in offshore funds shortly before she became SEBI chair in 2022 and that she kept an interest in offshore consultancies throughout her time as a wholetime director of SEBI. Additionally, her husband, an advisor to the investment firm Blackstone, perhaps benefited from Ms Buch’s statements encouraging investors to diversify to real estate and infrastructure trusts.

While Ms Buch has denied the Hindenburg allegations and claimed to have made all the proper disclosures of her stakes abroad, the most serious questions clouding her now relate to her alleged links to the Adanis, and the soundness of SEBI’s probe. The Congress, for instance, has questioned Ms Buch about her meetings with Gautam Adani shortly after she became SEBI chairperson, when allegations were already being raised against them in Parliament.

Most importantly, the Hindenburg report casts aside the lid that has been placed upon the Adani scandal. Just last month, the Supreme Court dismissed a plea seeking a review of its January 2024 verdict entrusting the Adani-Hindenburg case to SEBI. The judges again refused to order a court-monitored investigation and said the market regulator was carrying out a “comprehensive investigation” that “inspires confidence”. The Hindenburg report belies all such inspired confidence.