The Securities and Exchange Board of India (SEBI) is the apex regulator for the securities market with a preamble that affirms its commitment “to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.”

In February 2022, the Government announced the appointment of Madhabi Puri Buch, who was at the time a Whole Time Member on the SEBI board, as the first woman to head the securities markets regulator.

An Indian Institute of Management, Ahmedabad alumna with a graduate degree in Mathematics from St. Stephen’s College, New Delhi, Ms. Buch is also one of the youngest chiefs at SEBI, taking the helm from her predecessor in March 2022, when she was about 56.

A veteran of the investment banking and financial services industry, who at one-time headed ICICI Securities as its MD &CEO, Ms. Buch was expected to bring vital industry perspective to her job of regulating the markets and securities issuances while ensuring that investor protection was always accorded the highest priority.

A protege of N. Vaghul and subsequently K.V. Kamath during her years at ICICI, Ms. Buch even had a stint as a consultant to the Shanghai-based BRICS-established New Development Bank, which Mr. Kamath led for a while.

First test

Less than a year into her job at SEBI’s helm, Ms. Buch faced her first stern test of regulatory stewardship when, in January 2023, U.S. short-seller Hindenburg Research levelled exhaustive charges of stock price manipulation and accounting fraud against the Adani Group of companies.

With the prices of all the listed Adani Group entities nosediving in the wake of the Hindenburg allegations, hundreds of crores of investor wealth was wiped out in just a matter of a few trading sessions, sparking a series of petitions in the country’s top court seeking judicial intervention.

In early March 2023, the Supreme Court ordered the formation of a committee to look into possible regulatory failure in dealing with the allegations that the Adani Group firms flouted norms in the securities market.

Clean chit

And in May, the court-appointed panel returned a finding that it could not conclude there had been regulatory failure.

It also cited the various investigations SEBI had been conducting since as far back as October 2020 into the ownership of 13 entities tied to allegations in the Hindenburg report about minimum public shareholding, adding that the markets watchdog’s probe into the entities’ final ownership had drawn a blank.

So, when on August 10 this year Hindenburg fired a fresh salvo, this time levelling charges against Ms. Buch of conflicts of interest including having invested in a Mauritius-based offshore fund with links to the Adanis, all hell broke loose.

The SEBI Chairperson and her husband Dhaval Buch, a supply chain specialist who had served as FMCG major Unilever’s global chief procurement officer before retiring, issued two back-to-back statements in response to the short seller’s allegations seeking to clear the air.

In the first statement, the Buch couple asserted: “In the context of allegations made… against us, we would like to state that we strongly deny the baseless allegations and insinuations. The same are devoid of any truth. Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them.”

The markets watchdog, for its part, also issued an exhaustive statement on August 11 in which it emphasised that “relevant disclosures required in terms of holdings of securities and their transfers have been made by the Chairperson from time to time. Chairperson has also recused herself in matters involving potential conflicts of interest”.

People with knowledge of SEBI’s inner workings stressed that Ms. Buch had at no point in time sought to influence any of the multiple investigations being carried out by the markets watchdog.

“She can be very aggressive in her approach to getting work done and demanding results,” said a former member of one of the several committees SEBI uses in its consultative process to craft and fine tune policies and the overall regulatory environment.

“And yes, that level of abrasiveness is a clear failing. However, most of her former ICICI group colleagues appreciate and vouch for her personal integrity,” the person added, speaking on the condition of anonymity.

Ms. Buch is also facing a groundswell of internal restiveness in SEBI, with a grouping of officers questioning the “mistrust and lack of respect shown at the highest level towards employees”.

“She is facing a real media trial with the Opposition also deciding to target her to get at the government,” says a former banker. “Also, there are several regulatory measures that SEBI has taken and is planning that a group of market players are strongly opposed to. They too will be happy to see her fall,” the banker added.

Tightening norms

Among the measures tightening norms is a SEBI guideline that took effect on September 9 requiring all Foreign Portfolio Investors (FPIs) with more than 50% global exposure to India or holding ₹25,000 crore investment in Indian equities to disclose all granular details on the ultimate beneficiary of the fund to the regulator. Failing which, the FPI would have to liquidate and rebalance its holdings to comply with the threshold specified by SEBI. And another proposal aims to tighten guidelines for derivatives trading.

“For the sake of the institution and investor faith in the markets regulator, it will, however, be best if an independent review is conducted at the earliest to clear the air on everything related to the SEBI chief,” said another former SEBI official. “This is something that will surely be in her interest too, especially given the statement asserting that her life is an “open book”,” the person added.

SEBI Chairperson Madhabi Puri Buch. File
| Photo Credit: PTI

SEBI chief Madhabi Puri Buch and her husband Dhaval Buch on Friday (September 13, 2024) denied a series of allegations of impropriety and conflict of interest levelled by the Congress, saying these are “incorrect, motivated and defamatory”.

Buchs said the allegations are based on Income tax returns filed by them.

They further said all the information have been fully disclosed and taxes have been duly paid.

“Our income tax returns clearly have been obtained by adopting fraudulent means and illegally. This is a clear breach of not only our right to privacy (which is a fundamental right) but also a violation of the Income Tax Act,” Buchs said in a statement.

The Congress has recently levelled multiple allegations against SEBI chief and her husband, alleging a conflict of interest, involving a consultancy firm related to them.

The Congress had alleged that Dhaval Buch earned ₹4.78 crore from Mahindra Group at a time when the regulator was investigating it for market infractions.

According to the statement, Madhabi has never dealt with any file involving Agora Advisory, Agora Partners, the Mahindra Group, Pidilite, Dr Reddy’s, Alvarez and Marsal, Sembcorp, Visu Leasing or ICICI Bank at any stage after her joining Sebi.

“The allegations are completely false, malicious and defamatory. Madhabi has complied with all the disclosure and recusal guidelines of SEBI, and in fact, maintained a proactive continuing recusal list with SEBI over and above the requirements under the guidelines,” it added.

SEBI Chairperson Madhabi Puri Buch. File
| Photo Credit: PTI

Hindenburg Research alleged Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch of not responding to “emerging issues”, a day after the Congress alleged her of having 99% stake in a consultancy company that provided services to entities regulated by SEBI.

Foreign investors worried about market integrity, says Congress, seeking independent probe into SEBI

In its post on X, the short seller research firm said that Agora Advisory, a consultancy firm that it said was owned by Ms. Buch, provided services to listed entities including Mahindra and Mahindra, ICICI Bank, Dr. Reddy’s and Pidilite, while she was serving as a whole time member in SEBI. Similar allegations were levelled by the Congress on Tuesday (September 10, 2024) in a press briefing, which Dr. Reddy’s, Pidilite and Mahindra and Mahindra had denied in regulatory filings.

“These allegations apply to Ms. Buch’s Indian consulting entity with no details thus far on Ms. Buch’s Singapore-based consulting entity. Ms. Buch has maintained her complete silence for weeks on all of the emerging issues” Hindenburg said on September 11, in its post on X.

Also Read | On SEBI chairperson’s conflicts of interests

The Congress had claimed that Agora Advisory had continued to provide services to listed entities, contrary to an earlier statement by Ms. Buch saying the company had become dormant after she took up her role at SEBI.

In addition to this, the Congress also claimed that Ms. Buch’s spouse Dhaval Buch, was drawing income from Mahindra and Mahindra after his retirement. Mahindra and Mahindra denied these allegations.

New Delhi:

Madhabi Puri Buch, the chairperson of SEBI (Securities and Exchange Board of India), has not been paid any salary since her retirement, ICICI bank said today, denying Congress’s “office of profit” claims.

The Congress had alleged earlier today that Ms Buch, who joined SEBI as a member in 2017 and subsequently became its chairperson, had received Rs 16.8 crore from ICICI Bank as salary and other compensation.

“ICICI Bank or its group companies have not paid any salary or granted any ESOPs to Madhabi Puri Buch after her retirement, other than her retiral benefits. It may be noted that she had opted for superannuation with effect from October 31, 2013,” the bank said in a statement.

“During her employment with the ICICI Group, she received compensation in the form of salary, retiral benefits, bonus and ESOPs, in line with applicable policies…All the payments made to Ms. Buch post her retirement had accrued to her during her employment phase with the ICICI Group. These payments comprise ESOPs and retiral benefits,” the statement read. 

Congress’s Jairam Ramesh has claimed a conflict of interest on part of the SEBI chairperson. He said serious questions have been raised about it in the regulatory body’s Supreme Court-mandated investigations.

“These questions seem to have been simply brushed aside by the Government of India. Now comes this fresh revelation of shocking illegality,” Mr Ramesh said in a post on X.

At a press conference today, alleging conflict of interest, the Congress asked Prime Minister Narendra Modi to come clean as the head of the appointments committee of the cabinet on her appointment. 

The party alleged that the total amount received by Ms Buch from ICICI from her time of joining SEBI in 2017 and till today, totals Rs 16.8 crore which is 5.09 times the income she received from SEBI during the same period — Rs 3.3 crore.

The Supreme Court, the Congress said, should take note of the fresh revelations and demanded that the SEBI chairperson be sacked immediately. 

The headquarters of the Securities and Exchange Board of India in Mumbai on April 19, 2023.
| Photo Credit: Reuters

The story so far: Over a year and a half after U.S.-based Hindenburg Research alleged corporate malfeasance, stock price manipulation and breach of minimum public shareholding norms against the Adani Group of companies, the firm issued another report late last Saturday. It argued that India’s stock market regulator, the Securities and Exchange Board of India (SEBI), is reluctant to follow the trail on its charges about the use of offshore funds linked to “the Adani money siphoning scandal” because its own chairperson had a conflict of interest, having jointly invested in the same fund with her spouse.

How has SEBI responded to the charges?

SEBI Chairperson Madhabi Puri Buch and her husband, Dhaval Buch, in a statement last Sunday, said their investment in the fund flagged by Hindenburg was made during their stint as “private citizens” in Singapore, and almost two years before she joined as a SEBI member in 2017. This investment was spurred by Mr. Buch’s proximity to the fund’s Chief Investment Officer, Anil Ahuja, who was a “childhood friend”, and was redeemed in 2018 when Mr. Ahuja moved on from the role. They also cited a confirmation from Mr. Ahuja that the fund in question did not invest in any bond, equity or derivative of any Adani Group firm at any time. Mr. Ahuja was also a director of Adani Enterprises till 2017. On the U.S. firm’s charges that the SEBI chief owned two consulting firms, in Singapore and India, and transferred 100% of the Singapore outfit’s shares to her spouse in March 2022, the Buchs said these firms “became immediately dormant” on her appointment with SEBI. The transfer of the Singapore entity to Mr. Buch, who was said to have used both the entities since 2019 for his “own consultancy practice” with “prominent clients in the Indian industry”, was disclosed to SEBI as well as tax authorities in India.

In a separate statement, SEBI said that relevant disclosures required in terms of holdings of securities and their transfers have been made by Ms. Buch from time to time, and she has “also recused herself in matters involving potential conflicts of interest”, ostensibly referring to charges that the SEBI chief oversaw changes to regulations for Real Estate Investment Trusts (REITs) while her husband was an adviser to Blackstone with interests in the asset class.

SEBI also said it has completed 23 of the 24 investigations it had undertaken against the Adani Group, under the top court’s scrutiny, and the final one is close to completion.

What about the other entities?

The Adani Group reiterated that its “overseas holding structure is fully transparent, with all relevant details disclosed regularly in numerous public documents”, and noted that Mr. Ahuja was a nominee director of 3i investment fund in Adani Power (2007-08) and, later, a director of its flagship, Adani Enterprises, until 2017. 360 One, a wealth management firm formerly known as IIFL Wealth, which managed the fund IPE Plus Fund-1, named by Hindenburg, said Ms. Buch and Mr. Buch’s holdings in the fund were less than 1.5% of its total inflows, and it had made zero investments in any shares of the Adani Group either directly or indirectly through any fund.

Have fresh questions arisen since last Sunday’s set of clarifications?

Yes. Hindenburg Research said the Buchs’ statement contains important ‘admissions’ regarding the SEBI chief’s investment in an obscure fund structure run by a person who was an Adani director at the time, confirms a “massive conflict of interest” when it comes to SEBI’s probe into funds related to the Adani Group, and raises fresh questions. On the consulting firms owned by Ms. Buch, Hindenburg pointed out that Ms. Buch only transferred her stake in Singapore-based Agora Partners Singapore to her husband “two weeks after her appointment as SEBI chairperson”, and continued to hold 99% of the Indian firm that reported revenues of about $3,12,000 over three years till this March, while she was the SEBI chief. It asked if some of Mr. Buch’s consultancy clients in these were entities that SEBI is tasked with regulating, and whether they will release a full list of such clients and details of their engagements with both the consulting firms. “Finally, will the SEBI chairperson commit to a full, transparent and public investigation into these issues?” it asked.

Also read | With no remedy for Hindenburg, SEBI seems to look the other way

There has been no response yet from SEBI or the Buchs on these issues yet, while the Finance Ministry has maintained a stoic silence on the matter. While Opposition parties have continued to question the government over these allegations, fresh reports this week suggest that more sunlight may be necessary to quell any lingering doubts about any capriciousness in the administration of India’s booming securities markets. On Friday, Reuters reported that revenues accruing to Ms. Buch from the consultancy firms during her stint in SEBI, could constitute a potential breach of a SEBI policy in place since 2008. The ‘Code on Conflict of Interests for Members of Board’ says a SEBI member shall take all steps necessary to ensure that “any conflict of interest to which he may be subject to does not affect any decision of the Board”. Moreover, a member shall disclose interests which may conflict with their duties, and a whole-time member (including the chairman) shall not hold any other office of profit, nor engage in any other professional activity, which entails receipt of salary or fees.

A separate report by The Morning Context suggested that Ms. Buch did not recuse herself from a case pertaining to a firm called Essel Propack, in which a Blackstone subsidiary had acquired a 75% stake in 2019.

What may one look out for next?

Eight months ago, the Supreme Court had exuded “confidence” in SEBI’s investigation into the allegations against the Adani Group, brought to the fore by Hindenburg early last year. While noting its power to transfer an investigation from the “authorised agency” to the CBI or constitute a Special Investigation Team, the court had said this was a rare power, to be used only if there was strong evidence on record that the investigation was prima facie tainted or biased and its continuation would lead to a “failure of justice”. One of the grounds the court had highlighted for transferring an investigation was when accusations were levelled against the “top officials of the investigating agency thereby allowing them to influence the investigation”.

Ms. Buch, the first private sector executive to lead the market watchdog, has a three-year tenure that ends next March, and is eligible for a fresh term. While more clarity on the allegations around SEBI’s administration would help clear the air, expediting the sole pending investigation into the Adani Group, and swiftly following the closure of the 24 probes with enforcement proceedings culminating in “speaking orders” put in the public domain, could be the best way forward for the market watchdog.

With inputs from T. Ashokamithran.