Madhabi Puri Buch recused herself from conflict of interest matters: SEBI issues statement

Notably, the allegations made by Hindenburg Research, against the Adani Group, have been duly investigated by SEBI, the market regulator said in a statement

Market regulator SEBI issued a detailed statement this evening after US-based short-seller Hindenburg Research in its report alleged SEBI chair Madhabi Puri Buch had a stake in offshore entities linked to the Adani case.

Chairperson Madhabi Buch made relevant disclosures from time to time and recused herself in matters involving potential conflicts of interest, the regulator said in a statement. The regulator also said that it has duly investigated the allegations made by Hindenburg against Adani, and said that last of its 26 investigations is nearing completion now.

"Investors should remain calm and exercise due diligence before reacting to such reports. Investors may also like to take note of the disclaimer in the report that states that readers should assume that Hindenburg Research may have short positions in the securities covered in the report," the statement from SEBI also said.

SEBI further said in its statement on the report by Hindenburg Research," The report inter alia claims that SEBI has not taken any action against the Adani Group. It questions SEBI’s action of issuing a show cause notice to Hindenburg Research on June 27, 2024.  It further claims that SEBI has made changes to the SEBI (REIT) Regulations 2014, in order to benefit a diversified multinational financial conglomerate." "These issues warrant an appropriate response.  Notably, the allegations made by Hindenburg Research, against the Adani Group, have been duly investigated by SEBI."

It further adds that even the apex court in its order has noted that SEBI  has completed the
investigations in 22 out of 24 cases

Supreme Court in its order of January 3, 2024 noted that SEBI had completed twenty–two out of twenty–four investigations into the Adani group. Subsequently, one more investigation was completed in March 2024, and one remaining investigation is close to completion.  During the ongoing investigation in this matter, more than 100 summons, around 1,100 letters and emails have been issued to seek information. Further, more than 100 communications have been made seeking assistance from domestic/foreign regulators and external agencies. Also more than 300 documents containing around 12,000 pages have been examined.

The report also seeks to question SEBI’s action in issuing a show cause notice to Hindenburg Research, on June 27, 2024.  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. It is noted that Hindenburg Research has itself made the show cause notice issued to it available on its website. The show cause notice contains the reasons for its issuance. 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.

The report has also stated that the implementation of the SEBI (REIT) Regulations 2014 as well as changes in such regulations had resulted in significant benefit to a large multinational financial conglomerate. In this regard, it may be noted that the SEBI (REIT) Regulations, 2014 has been amended from time to time.

As with all cases involving introduction of a new regulation or amendment to an existing regulation, a robust consultation process for seeking inputs and feedback of the industry, investors, intermediaries, relevant Advisory Committee and the public at large is in place. Only after consultation, a proposal for introduction of a new regulation or change in the existing regulation is placed for the consideration of and deliberation of the SEBI Board. Regulations are notified after approval of the SEBI Board. As a measure of transparency, the agenda papers for Board meetings and outcomes of Board discussions are also published on SEBI website. Hence, claims that such regulations, changes to regulations or circulars issued related to REITs were to favour one large multinational financial conglomerate, are inappropriate.

The market regulator further adds that for the development of the Indian securities market, SEBI has underscored the potential of REITs, SM REITs, InvITs and municipal bonds amongst other assets and they are highlighted in the latest SEBI's Annual Report.Therefore, the claim that promoting REITs and SM REITs among various other asset classes by SEBI was only for benefitting one large multinational financial conglomerate, is inappropriate.