Hindenburg and SEBI Conflict: Response Made by SEBI Chairman Madhuri Buch

On August 10, 2024, Hindenburg Research, a US-based short seller firm, made a fresh allegation involving Adani Group and the SEBI Chairman, Madhuri Buch. The firm alleged that SEBI chairperson Madhabi Puri Buch and her husband Dhaval Buch had a stake in obscure offshore entities used in Adani’s ‘money siphoning scandal’.

Joint Statement by Madhabi Puri Buch and Her Husband Dhaval Buch

On August 10, 2024, Madhabi Puri Buch and her husband Dhaval Buch issued a joint statement denying the “baseless allegations made in the report” and saying the charges were “devoid of any truth.”

In addition, SEBI also defended its chairperson in a two-page statement. The statement stated that Buch had made relevant disclosures from time to time and “had also recused herself in matters involving potential conflicts of interest.”

Here’s a breakdown of SEBI’s key points:

Investor Protection: SEBI emphasises investor prudence, urging them to conduct their own research before reacting to reports like Hindenburg’s. Investors are also reminded of the disclaimer within the report, highlighting Hindenburg’s potential short positions in the targeted securities.

Adani Group Investigations: SEBI clarifies that they have duly investigated the Adani Group. They detail the extensive investigative process undertaken, including issuing summons, gathering information through communications, and examining documents. These investigations are followed by quasi-judicial enforcement proceedings. While SEBI cannot comment on ongoing cases, they assure investors that appropriate actions are underway within the legal framework.

Show Cause Notice to Hindenburg:  SEBI defends its issuance of a show cause notice to Hindenburg on June 27th, 2024. They maintain that the notice was issued following due process and highlights that Hindenburg has publicly acknowledged receiving the notice. SEBI further emphasises that the matter is ongoing and being handled fairly.

REIT Regulations: SEBI addresses claims that changes to REIT regulations were made to benefit a specific financial conglomerate. They outline the transparent consultation process involved in introducing or modifying regulations. Input from industry professionals, investors, and the public is actively sought before proposals reach the SEBI Board for approval.

Promoting Asset Classes: SEBI clarifies its support for various asset classes like REITs, SM REITs, InvITs, and Municipal Bonds. They advocate for these instruments’ potential to democratise markets, increase financial inclusion, and facilitate capital formation. SEBI refutes the claim that this emphasis was solely to benefit a specific company.

Conflict of Interest: SEBI underlines its robust internal mechanisms to manage conflicts of interest. Disclosure frameworks and recusal procedures are in place to ensure impartiality. The statement mentions the Chairperson’s compliance with disclosure requirements and recusal in cases of potential conflicts.

SEBI reiterated its commitment to upholding a strong regulatory framework aligned with global best practices. The market regulator remains dedicated to investor protection and ensuring the orderly growth of India’s capital markets.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.