New Delhi: In August 2024, the Securities and Exchange Board of India (SEBI) released a statement asserting that its chairperson, Madhabi Puri Buch, had “recused herself in matters involving potential conflict of interest.” The statement was a response to allegations from the US-based short-seller Hindenburg Research, which claimed Buch held undisclosed ties to offshore entities linked to Adani Group. Yet recent developments have raised questions about SEBI’s transparency in addressing these potential conflicts.
Following SEBI’s announcement, a Right to Information (RTI) request was filed, seeking details on cases in which Buch had recused herself due to conflicts of interest.
SEBI responded that information on Buch’s recusals was “not readily available” and that compiling it would “disproportionately divert resources,” invoking Section 7(9) of the RTI Act. This response has left transparency advocates questioning SEBI’s commitment to openness, especially when its impartiality is under increased scrutiny.
In August 2024, as SEBI’s investigation continued, Hindenburg published a follow-up report shifting focus from Adani to SEBI itself. The report alleged that SEBI chairperson Buch had potential conflicts of interest due to undisclosed ties to offshore funds linked to Adani’s network. Hindenburg claimed that Buch and her husband held stakes in funds used by Vinod Adani, brother of Adani Group chairman Gautam Adani, to move funds and influence stock prices.
In response to these allegations, SEBI released a press statement on August 10, asserting that Buch had “recused herself in matters involving potential conflict of interest.” This public statement aimed to reinforce SEBI’s commitment to impartiality, suggesting that Buch had stepped back from cases where her neutrality might be questioned.
The RTI request and SEBI’s invocation of Section 7(9) of the RTI Act
After SEBI’s statement, an RTI request was filed to clarify Buch’s recusals, seeking specific details about the cases from which she had withdrawn. However, on September 20, SEBI’s Central Public Information Officer (CPIO) responded that information on Buch’s recusals was “not readily available” and collecting it would “disproportionately divert resources,” invoking Section 7(9) of the RTI Act. This section permits authorities to offer information in an alternative format if gathering it in the requested format would consume excessive resources but does not authorise outright denial.
Transparency advocate retired commodore Lokesh Batra criticised SEBI’s application of Section 7(9) as a means to avoid disclosure. “Section 7(9) was never intended as a shield to block access to information,” he said. “It’s a practical measure for resource management, not a way to evade disclosure on critical public interest matters.”
Also read: As SEBI Board Member Calls Out Madhabi Buch in Adani Probe, Will SC Act?
Moreover, the First Appellate Authority (FAA) upheld SEBI’s refusal, adding an institutional layer to the decision to withhold this information. “If SEBI claimed in August to have detailed information on Buch’s recusals, then it should have been able to provide the information requested in the RTI. The refusal suggests a potential lack of transparency,” Batra added.
This discrepancy has raised further doubts about SEBI’s transparency and whether its use of Section 7(9) reflects a strategic manoeuvre to avoid releasing sensitive information rather than a legitimate resource constraint.
Why transparency matters in SEBI’s role as market regulator
Transparency is central to SEBI’s mandate as India’s primary market regulator. SEBI’s role includes safeguarding investor interests and promoting fair practices in the financial markets. With the rise of retail investment in India, transparency and regulatory impartiality have become even more crucial, as millions of new investors rely on SEBI’s oversight.
The RTI controversy raises significant questions about SEBI’s credibility. By declining to disclose details on Buch’s recusals, SEBI risks creating a perception of selective transparency, potentially undermining its assurances of impartiality in the Adani investigation. As one of India’s key regulatory bodies, SEBI’s commitment to openness is essential to maintaining public confidence, especially in cases with broad implications.
As India’s financial markets grow and attract more retail investors, SEBI’s transparency and credibility remain essential for sustaining investor confidence. Moving forward, SEBI’s willingness to adopt greater transparency standards could be crucial in defining its role as a trustworthy steward of India’s financial ecosystem.
Background: The Hindenburg-Adani report and SEBI’s investigation
The controversy over SEBI’s transparency dates back to January 2023, when Hindenburg Research published a report accusing the Adani Group of stock manipulation, hidden debts, and misuse of offshore tax havens. The report alleged that the Adani Group, one of India’s most powerful conglomerates, engaged in financial improprieties compromising the integrity of India’s stock market. The public outcry that followed spurred SEBI to investigate Adani’s financial dealings.
Also read: SEBI Chief Madhabi Buch’s Hour of Reckoning Is Fast Approaching
By early 2024, the Supreme Court of India had intervened, ordering SEBI to conduct a thorough investigation and monitor its progress closely. The Supreme Court’s involvement underscored the gravity of the allegations and mandated SEBI to act as an impartial watchdog of India’s financial markets.
Broader implications for regulatory accountability
This situation has led to calls for increased accountability within SEBI, particularly concerning the disclosure of recusals for potential conflicts of interest. Advocates argue that SEBI should adopt a policy of proactive disclosure, making public any recusals by senior officials like Buch in high-profile cases. “Such transparency protocols are standard in many international regulatory frameworks and could help reinforce SEBI’s credibility in the eyes of both domestic and international investors,” Batra said.
The demand for accountability is further fuelled by the perception that SEBI’s response to the RTI request reveals a gap between its public stance and its internal practices. Regulatory experts emphasise that SEBI’s role as a transparent, accountable authority is fundamental to its mission, and that public access to information on recusals is a necessary aspect of that role.
For now, SEBI’s actions leave a lingering question: Can a regulator responsible for overseeing transparency afford to keep its own practices under wraps?
