M.K. Venu 
A senior banker told me that the Securities and Exchange Board of India (SEBI), as a stock markets regulator, has laid down very stringent rules for officials who work at the treasury department of banks or mutual funds which buy and sell shares on a daily basis.
For one, these officials are not allowed to buy shares in their name or in the name of their family members. This is strictly prohibited.
If SEBI could set such rules for other market players, why wouldn’t it follow the same rule itself? This is the biggest question Madhabi Puri Buch will face when she is asked to appear before a parliamentary committee probing the performance of regulatory bodies.
News reports suggest that the Public Accounts Committee (PAC) of Parliament, which is headed by an Opposition MP, has already included on its agenda a review of SEBI’s performance. The SEBI chairperson will have to speak up sooner than later. Silence is not an option anymore.
So far, Buch has refused to answer myriad questions being raised on a daily basis about her conduct as a stock market regulator after the US based research firm, Hindenburg alleged she had a stake in an offshore entity which was used by the Adani group to allegedly manipulate its own group company shares.
After these allegations were levelled a few weeks ago, many more revelations have been made which make her continuance as a regulator untenable. Most of the issues relate to conflict of interest which seems all pervasive in her actions.
For instance it has been revealed that she had been holding shares of ICICI where she worked before joining SEBI, apparently as part of her post-retirement benefits from the private company. If she was holding large chunks of ICICI shares then how was she taking decisions as SEBI chair which might have affected the value the shares she was holding. There is conflict written all over this.
Past SEBI chairs are known to have sold all the shares they held before taking over as the market regulator. This seems to have been the convention. Why Madhabi Puri Buch did not follow this convention is not known.
The bigger question is why the appointments committee of the cabinet – headed by Prime Minister Narendra Modi himself – did not raise this issue at the time of her appointment.
Buch seems to have had an implicit assurance from the political authorities that ‘conflict issues” either would not matter or perhaps would be taken care of if someone were to raise them. Otherwise, a highly intelligent and successful financial market professional like her would have been acutely aware of the serious issues of conflict she was bringing into the system after her appointment as a SEBI board member first and chairperson later .
She also continued to be a shareholder of another advisory service, Agora Ltd, run by her husband during her tenure as SEBI board member and chairperson. This advisory service also earned a lot of revenue during her tenure in SEBI.
It is not clear which corporates were advised by Agora. It is also not clear whether some of the corporates advised by Agora were the subject of any SEBI inquiry or probe.
Meanwhile, Buch’s husband was also advisor to, Blackstone, the largest multinational private equity firm operating in India. Blackstone would have invested in dozens of companies where Madhabi’s husband might have played a role. There could be potential conflict of interest if such companies were directly or indirectly affected by any of SEBI’s decisions during this period.
These are all questions which Madhabi will surely face if she appears before the parliamentary committee at a future date.
Of course, the primary issue will remain her role in the Adani probe given that she had a stake in an offshore entity allegedly linked to Vinod Adani, brother of Gautam Adani.
The most damning news report over the past week has been one in which a present SEBI board member – speaking to Scroll on condition of anonymity – revealed that Buch had not recused herself in the Adani probe which was ordered by Supreme Court in 2023. This potentially puts a question mark over the entire court monitored Adani probe. The PAC is bound ask her if she was unaware that she was probing an offshore entity where she had an economic interest in the past.
Things have been made worse for Buch with a section of SEBI officers publicly agitating about the ‘toxic work culture” at the Board and demanding her resignation. Clearly she doesn’t seem to have much support from within the organisation.
But Madhabi Puri Buch evidently has the backing of the Modi-led government, since both the finance ministry and the PMO have maintained a studied silence on the growing controversies so far. The government has allowed her to go about her business as if nothing has happened. This state of affairs cannot persist for long.
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.