Crucial Sebi board meeting on Sept 30, first since controversy over Chairperson

Sebi chairperson Madhabi Puri Buch

The capital market regulator will hold a board meeting on September 30, where issues related to charges against Chairperson Madhabi Puri Buch may be taken up for discussion.

The September board meeting will be crucial as this will be the first occasion the board will be meeting after Hindenburg levelled allegations against Buch on August 10. Subsequently, Congress spokesperson Pawan Khera levelled a series of charges.

“This is the big elephant in the room and it will definitely be taken up for discussion,” a person familiar with the discussions within the regulator said. “In such an event, the chairperson will recuse herself from the meeting when the issue is taken up for discussion,” the person said. Another source said, “This matter (allegations against the chairperson) has been in deliberation for the past week to 10 days.”

The agenda for the September meeting has not been freezed yet.

Also read: Sebi refuses to disclose instances when Madhabi Buch recused on conflict of interest cases in RTI reply

“Such matters are not always listed in the agenda, it will come up for discussion nevertheless,” another person said.

The September 30 board meeting may also discuss as many as 11 consultation papers floated by Sebi that have passed their deadline for public consultation and may now be ready to be taken to the board for a final decision. These include, among other issues, significant proposals such as the "Mutual Fund Lite" regulations for passively managed funds, the introduction of a new asset class between PMS and mutual funds, extension of the definition of "connected person" under insider trading regulations to include certain relatives, and the one markets are nervously awaiting, measures related to the F&O segment.

The Sebi spokesperson did not respond to an email seeking comment on the September 30 board meeting agenda.

Also read: Lokpal directs complainants who raised Sebi chief's conflict-of-interest allegations to come back with more details

‘Disclosures verified by board members post Hindenburg allegations’

Sources close to the development said that after the Hindenburg allegations came to light on the night of Saturday, August 10, some of the Board members met at the Sebi headquarters in Mumbai over the weekend, scanning documents to verify the disclosures made by the chairperson. “Some of us were in office and were in touch with the members who were not present, and we were satisfied with the disclosures,” the person said.

Sebi, however, did not convene an emergency Board meeting to attest, validate or record the findings officially. The regulator instead issued a press release, which carried no details of who were part of the validation process or specifics on the various disclosures.

Some of persons close to the development feel that it is “unfair” to expect the Sebi Board to be answerable for the disclosures because the Chairperson is appointed by the government. They also underscored the hesitation on part of some of the members on the grounds that they were reportees to the Chairperson.

The person also said that Sebi Board members including the Chairperson are keen on an independent committee or an official process to verify the disclosures through “due process” since the matter refuses to die down.

Allegation by Hindenburg, Khera

In the  note released late evening (Indian Time) , August 10, Hindenburg leveled three  allegations against Buch: investment in a global off-shore fund where Vinod Adani was also an investor, her ownership of for-profit consulting firms in India and Singapore, and conflict of interest with respect to Madhabi’s husband Dhaval Buch’s role as a consultant at Blackstone, a private equity player with significant interest in real estate investment trust (Reits), that has got notable push from Sebi under Madhabi’s term in office.

Madhabi Puri Buch and her husband Dhaval Buch denied the charges, a day after Hindenburg’s allegations. Sebi also issued a press release stating that “suitable disclosures were made from time to time.”

Thereafter, Congress Spokesperson Pawan Khera levelled fresh charges claiming that the chairperson had received rental income from a Wockhardt group company, besides having earnings from a for-profit consultancy company that she owned.

He also brought to fore the fact that she continued to receive income from ICICI Bank during her term as Sebi Chairperson.

The Buchs have countered the allegations. ICICI Bank also clarified in exchange filings that the bank did not pay her any salary or ESOPs after she retired from the bank in October 2013. Wockhardt has also denied the allegations.

However, neither the Sebi Board nor the Government have addressed the issues officially.

Lokpal asks for evidence of corruption

On September 20, Lokpal of India passed an order directing the two complainants including member of parliament Mahua Moitra, who had raised the issue of allegations against Buch, to articulate the allegations which may constitute "offence of corruption" under Prevention of Corruption Act, 1988. Lokpal asked the complainants to state how personal investments made or income earned by the named public servant and more so, the income earned prior to entering the public office, would constitute an offence of corruption as defined under the Prevention of Corruption Act. It also asked the complainants to state how non-disclosure of such income and assets would qualify as corruption under the Act. The order added, "For certain acts of commission or omission, may at best tantamount to an impropriety, but need not necessarily be reckoned as an illegality or for that matter an offence of corruption, ascribable to Prevention of Corruption Act, 1988".

Meanwhile, there are media reports suggesting that the Sebi chief will be called for a performance review of the regulator by the Public Accounts Committee (PAC).

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