S.N. Sahu 
The alleged conflict of interest of SEBI chairperson Madhabi Buch in investing in offshore funds connected to the Adani group and her role in not declaring that interest and failing to find out the purported use of those funds by Adani in manipulating his share prices should be seen in the context of her interview to the International Financial Law Review (IFLR) last year.
Skeletons in the private sector
On March 6, 2023, while speaking to IFLR, Madhabi while dealing with a question “What inspired you to do what you do?” stated that she being part of the private sector for two decades knew all the things that she expected the regulator to know. So she thought, “Wouldn’t it be fun to be on the other side?” Proceeding further she also claimed, “I also knew where all the skeletons in the private sector were hidden, so it felt like I could really make a difference, and that is what I would enjoy!
She went on to recall people telling her that the money she would get as a government employee would be much less than she was getting in the private sector. In response, she stated, “One doesn’t always need to be paid in money.” While asserting that she enjoyed what she did as chairperson of SEBI because it made a difference Madhabi Buch made a bold remark, “In that currency, I feel I get paid a bucket load every single day.”
Skeletons in the form of conflict of interest
She claimed in March 2023 that she “…knew where all the skeletons in the private sector were hidden.” It is quite ironic that slightly less than a year and a half later the Hindenburg report is bringing to public domain her own alleged “hidden skeletons’ in the form of Madhabi and her husband, Dhaval Buch’s financial stakes in the obscure offshore funds, linked to Adani group.
The said report made a startling claim on August 10 that she as the chairperson of SEBI did not unearth the details of those funds in spite of the directions of the Supreme Court to do so for ascertaining if those were used by Adani enterprises allegedly to manipulate their share prices. In fact, the Hindenburg Research is suggestive of Madhabi and her husband’s “hidden stakes” in offshore companies which have close connections with the Adani Group
Has such an expose by Hindenburg report dashed her feeling as chairperson of SEBI of getting paid “a bucket load every single day”?
Impairment of integrity of SEBI
The startling expose in the Hindenburg report concerning the financial links of Madhabi with the Adani group represents a very serious conflict of interest with her official role as SEBI chairperson who, among others, is mandated to act against fraudulent and unfair trade practices in the securities market and investigate and takes corrective measures for maintaining market integrity and protecting investors from market manipulations. Those alleged charges raise very serious questions concerning the impartiality of SEBI, its institutional integrity and the role played by it in ensuring free and fair corporate governance.
SEBI Bhavan in Mumbai, Maharashtra. Credit Wikimedia Commons
Conflict of interest
It is worth recalling that the Hindenburg report stated in December 2023 that a firm named Global Dynamic Opportunities Fund(GDOF), located in the tax haven Bermuda, was one among the units employed by Adani Group chief Gautam Adani’s brother Vinod Adani to allegedly fiddle with the stock market and hike its share prices. It was ascertained after investigation that GDOF invested in IPE Plus Fund 1, a fund registered in Mauritius, where tax exemptions are allowed. It was alleged that the fund from Mauritius was used in the Indian financial markets.
Based on a catalogue of documents from whistleblowers, the Hindenburg report alleged that Madhabi and Dhaval Buch put their money in the IPE Plus Fund in June 2015 when she was not a full-time member of SEBI. She was appointed a full-time member of the Securities and Exchanges Board of India in 2017 and just weeks preceding that, Dhaval Buch wrote to a Mauritius fund administrator requesting that he would “be the sole person authorised to operate the accounts”. It resulted in moving “the assets out of his wife’s name ahead of the politically sensitive appointment”, Hindenburg Research said.
Also read: Hindenburg Report: Silence from Government and Absurd Statements Further Erode India’s Credibility
But strangely Madhabi in 2018, a year after her appointment as a full-time member of SEBI, wrote an email from her private Gmail account to redeem the amount which her husband was operating. Such an email from her unmistakably proved that she was still controlling the shares which ostensibly was in the name of her husband. This one example clearly demonstrates the conflict of interest and it allegedly indicates her crucial role in upholding neutrality as chairperson and creating conditions for taking forward the cause of good corporate governance.
There are other cases of conflict of interest flagged by the Hindenburg report. It stated that Madhavi established a firm, the Agora Advisory, in India. After the expose by the Hindenburg report that she continued to have stakes in it even after her appointment as Chairperson of SEBI she claimed that it remained dormant thereafter. Now the Report claims that she has a 99% stake in Agora Advisory till as late as March 2024, even though Dhaval had replaced her as director in 2017. She was also promoting a private equity firm, Black Stone, in which her husband occupied a high position. The Scroll reported that the same firm sponsored the initial public offering of two of India’s four Real Estate Investment Trusts, or REITs, to get the SEBI’s approval. Madhabi Buch as chairperson of SEBI openly campaigned for generating investment in favour of those Trusts and certainly, it contravened her role as an impartial regulator.
Bold measures required to uphold corporate governance
The “hidden skeletons” of the private sector about which Madhabi was aware before she became SEBI’s chairperson are now allegedly found in her cupboard. Such impairment of the integrity of SEBI forms part of the pattern of the collapse of the institutions of governance during the Modi regime. This does not augur well for India and specifically for its market which sadly is now plagued by the maladies of crony capitalism. Radical and bold measures are needed to address the malady plaguing the market to restore the confidence of investors who are shying away from India.
S.N. Sahu served as the Officer on Special Duty to the President of India.