For over two weeks now, the Modi government has maintained radio silence on the critical question of whether Securities and Exchange Board of India (SEBI) chief Madhabi Puri Buch had formally recused herself from SEBI’s investigation of the offshore entities used by the Adani group to allegedly manipulate its stock prices.
Consequently, one of Asia’s largest markets had been left to speculate on whether its regulator was indeed tainted. Following Hindenburg’s revelations about her past links with one of the offshore entities, the Union finance ministry – which effectively governs SEBI – has not helped matters by saying it has nothing to add to what Buch had said in her defence. Which is neither here nor there, since she has steadfastly refused to answer the one specific question which really matters: did she recuse herself from the probe into Adani offshore entities as propriety and SEBI’s own norms required?
This conspiracy of silence has been broken now by a SEBI board member who has anonymously revealed to the online news platform Scroll that Buch “did not recuse herself from the market regulator’s investigation into alleged stock manipulation by the Adani Group.”
The board member added: ” Buch, in fact, oversaw SEBI’s Adani probe because it was ordered by the Supreme Court”.
This revelation clearly contradicts SEBI’s official statement that Buch had “recused herself in matters involving potential conflicts of interest” and helps explain why Buch has avoided answering the specific question of whether she had recused herself in the Adani matter.
If a member of the SEBI board has now clarified, even if anonymously, that Buch had not recused herself from the investigation when the Supreme Court directed the Board to probe Hindenburg’s original allegations, then there is little doubt left that she was hiding this from the public and markets alike. It is also possible that the SEBI board member is consciously distancing the board from Buch. Remember, her statement implicitly claimed that the SEBI board was backing her. Surely this claim has now come under a cloud.
If true, her non-recusal has grave consequences. One direct implication is that it brings under a cloud SEBI’s entire investigation into the Adani entities under the aegis of the Supreme Court.
The investigation is not complete yet and the Supreme Court is still seized of the matter. The anonymous statement by a SEBI board member cannot be ignored, least of all by the court, which has the power to establish the veracity of this claim. If a review of SEBI records establishes that the claim is true, what could be the remedy?
The Supreme Court could perhaps appoint another independent committee comprising former SEBI chiefs and officials and possibly a member of the judiciary to re-investigate the matter and give a report within a few months. Surely a lot of information would have already been gathered by SEBI in its ongoing probe lasting many months. In any case, the Adani entities were being probed since 2017 and a lot of material information would have been collected gradually. One presumes that if Hindenburg was able to acquire so much information, mostly collected from Indian sources, SEBI would also have them. The question is only one of how to read and interpret the information within the four corners of the law, security rules and regulations.
Madhabi Buch made an interesting statement at a public event she attended in Mumbai this week. She said that for the business environment at large, “regulation and compliances are important as they foster trust in the system”.
Needless to say, to “foster trust in the system”, sometimes the regulator must also come clean. That is the least which can be expected of any regulator.
This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.
