Madhabi Puri Buch's IIM-Ahmedabad batchmates call allegations against her 'false'

Securities and Exchange Board of India's chairperson Madhabi Puri Buch found support from her Indian Institute of Ahmedabad batchmates, who have dismissed the allegations against her as baseless.

They said the allegations have implications not just for her personally but for the credibility of an “important democratic institution”.

Buch passed out of the top management B-school of the country in 1988.

The batchmates, in a statement, said the narrative around the Sebi chief did not "ring true" to them as they know her for over 35 years and hence they did some due diligence to "fact check" all the questions raised.

The statement pointed out that they spoke with "people familiar with the questions" and accessed publicly available documents to verify the claims. "Not surprisingly, we found that the narrative being built around her, while rooted in data apparently sourced from her income tax returns themselves, is clearly false."

The support comes amid reports that Parliament’s public accounts committee (PAC) is set to investigate Buch and may summon her later this month.

As the SEBI chief has faced a string of accusations over the last few weeks, the IIM-A batchmates laid down arguments in support of Buch.

What did the letter entail?

Firstly, there was an accusation against Madhabi Puri Buch for receiving ESOPs from ICICI Group beyond the 3-month limit.

IIM-A batchmates refuted this claim by clarifying that the ESOP scheme provisions differ for resigning versus retiring employees of ICICI Group.

They wrote, "Like many other senior employees of ICICI Group, Madhabi Puri Buch got ESOPs during her employment with them. As per the ESOP Scheme, employees who resign from the Bank are required to exercise their vested options within 3 months. However, employees who retire are permitted to exercise their options up to 10 years after vesting."

So glad #MadhabiPuriBuchs @IIMAhmedabad classmates and friends, have done fact checking to show how baseless the allegations are that have serious implications not just for her personally but also for the strength and credibility of an important democratic institution. #SEBI pic.twitter.com/KAnjUtyopd
GhoseSpot (@SandipGhose) September 9, 2024

As already confirmed by ICICI Bank in its statement, Madhabi superannuated (i.e., retired) from ICICI Bank. Thus, she had 10 years in which to exercise her options. This is an extremely common feature of ESOPs of many companies.

The second accusation concerned uneven retiral benefits or pension amounts. IIM-A batchmates again supported Buch, stating that there were no discrepancies. They argued that Buch, like all ICICI Group employees, was covered by a contributory annuity scheme from ICICI Prudential, which provided consistent monthly payments.

They further explained that upon retirement, employees have the option to exercise their stock options (ESOPs) in different years. The "perquisite value" of these options—essentially the financial benefit from exercising them—is based on the market price of the company's shares at the time of exercise. Since stock market prices fluctuate, the value of these options and the resulting income can vary significantly from year to year. High value years occur when options are exercised, while years with no exercised options show zero value. This variation accounts for discrepancies in reported income from year to year.

They stated, "It is not a surprise that this appears as ‘salary’ in her returns since the Income Tax Rules require this prerequisite income to be filed under ‘salary’ both by ICICI Bank and by her. This is the law of land."

The third accusation was whether ICICI Bank paid TDS on Buch's behalf. The letter denied this claim, stating, "Whenever employees or ex-employees exercise their options, ICICI Bank collects Perquisite Tax (TDS) upfront from them and pays the tax authorities from this collection. ICICI Bank did not pay TDS from its own funds. Madhabi did."

The letter also addressed whether Madhabi was allowed to hold and transact ESOPs while serving on the SEBI board. The batchmates confirmed affirmatively, noting that SEBI guidelines permit board members, including the chairperson, to hold and transact ESOPs as long as they adhere to disclosure requirements.

They stated, "This is abundantly clear from the Code of Conflict of SEBI in a para of their document on their website (see link: https://www.sebi.gov.in/conflict.html). As part of our due diligence, we expect to very soon obtain confirmation that Madhabi had fully complied with all disclosure and recusal requirements."

Furthermore, they addressed the question of whether Buch was moonlighting with a private equity firm while employed at ICICI Bank. The batchmates clarified that the bank was fully aware of her involvement with the PE firm.

In the letter, they noted that Buch had relocated to Singapore in 2011 and took a long unpaid leave to join her husband. While in Singapore, she requested and received permission from ICICI Bank to work with a private equity firm there, as it did not present a conflict of interest.

They stated, "In 2013, when it became clear to Madhabi that she was likely to stay on in Singapore, she communicated this to ICICI Bank and resigned voluntarily. The bank was fully aware of her decision and had approved her role with the private equity firm. It was also fully aware that her status with ICICI involved a stand-still arrangement, meaning all salary and benefits were zero."

ALSO READ: Congress accuses Sebi chief Buch of getting rental income from firm linked to Wockhardt, alleges corruption

What has happened thus far?

Recently, the Congress in a fresh set of allegations accused Buch of "out and out corruption." Party spokesperson Pawan Khera alleged that Buch rented out her properties to Carol Info Services, which is part of Wockhardt, against whom the market regulator is investigating several cases including that of insider trading.

Wockhardt refuted the allegations. "In this regard, we categorically deny these allegations and state that these allegations are completely baseless and misleading," the firm said in a regulatory filing.

Earlier, the Congress questioned the payments Buch received from her former employer, ICICI Bank even after she quit the private lender and joined Sebi.

The payments violated office of profit rules, the party said, calling for an independent investigation. ICICI Bank had denied wrongdoing in the payments made to Buch.

SEBI employees protest at Mumbai HQ, seek resignation of Madhabi Puri Buch
A group of SEBI employees has complained to the finance ministry about a "toxic work culture" within the regulator. Some of them held an unprecedented protest outside the Sebi office in Mumbai.

It all started after Hindenburg Research accused Buch of conflict of interest over Sebi’s investigation into the allegations the American short-seller levelled against the Adani Group.

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