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.

In this file photo, SEBI Chairperson Madhabi Puri Buch speaks during CII’s 17th Corporate Governance Summit, in Mumbai.
| Photo Credit: PTI

U.S.-based short-seller Hindenburg Research is attacking capital markets regulator SEBI’s credibility and attempting a character assassination of its chief, Madhabi Puri Buch and her husband Dhaval said on Sunday (August 11, 2024).

In a detailed statement issued this evening, the Buchs clarified on the raft of allegations made by Hindenburg in a report on Saturday (August 10, 2024).

“They have chosen to attack the credibility of Sebi and attempt character assassination of the Sebi chairperson,” the statement said.

Hindenburg had alleged that it suspects SEBI’s unwillingness to act against Adani Group may be because Ms. Madhabi had stakes in offshore funds linked to the conglomerate. The Buchs had immediately termed the allegations “baseless” in an early morning statement.

While Ms. Madhabi serves as the chairperson of SEBI, her husband is a senior advisor with Blackstone.

In the fresh statement, the Buchs said their investment in a fund promoted by IIFL Wealth Management was as Singapore-based private citizens, and made two years before Ms. Madhabi joined SEBI as a whole-time member in 2017.

According to the statement, Buchs decided to invest in the two funds on advice of Mr. Dhaval’s childhood friend, Anil Ahuja.

Mr. Ahuja is the person who the Hindenburg report has identified as the founder and Chief Investment Officer of Mauritius-based IPE Plus Fund and who the Adani Group also in its statement said was a nominee of 3i Investment Fund in Adani power (2007-2008) and served as a director of Adani Enterprises for three terms spanning nine years ended June 2017.

Citing Mr. Ahuja’s statement, the Buchs said that at no point did the fund invest in any bond, equity, or derivative of any Adani Group company.

On the Hindenburg report’s concerns surrounding Mr. Dhaval’s association with Blackstone, the Buch couple said the appointment was on account of his deep expertise in supply chain management and predates Ms. Madhabi’s elevation of becoming the SEBI chairperson.

“At no time has Dhaval been associated with the real estate side of Blackstone,” they added.

They also clarified that immediately on Mr. Dhaval’s appointment, the Blackstone Group was added to Ms. Madhabi’s “recusal list” maintained with SEBI.

Making it clear that all the regulations in SEBI are approved by its board and not by the chairperson, the statement said insinuations of a handful of the decisions concerning the Real Estate Investments Trusts industry are favours to specific party are “malicious and motivated”.

They said in the last two years, SEBI has issued over 300 circulars across the entire market ecosystem and these include ease of doing business initiatives.

On Ms. Madhabi’s two consulting firms, the couple said the entities became “dormant” on her appointment at SEBI and added that her shareholding in them was also disclosed to SEBI.

However, it also added that on Mr. Dhaval’s retirement from Unilever, he started a consultancy practice through the same companies and worked for prominent clients in India.

Linking the earnings in the consultancy companies to Ms. Madhabi’s current government salary is “malicious”, the statement said.

In the report, Hindenburg alleges that Ms. Madhabi “currently” has a 99% ownership in Indian consulting business called Agora Advisory where her husband is a director.

“When the shareholding of the Singapore entity moved to Dhaval, this was once again disclosed, not just to Sebi, but also to the Singapore authorities and the Indian tax authorities,” it said adding that SEBI has strong institutional mechanisms on disclosure and recusal norms.

The statement reminded all that Hindenburg has been served a show cause notice for violations in India, and called it “unfortunate” that instead of replying to it, the entity has chosen to attack SEBI’s credibility and is an attempt of character assassination of its chief, the statement by Buchs said.

In January 2023, Hindenburg published a report accusing the Adani Group of financial irregularities, leading to a significant drop in the company’s stock price. File.
| Photo Credit: VIJAY SONEJI

Rejecting the fresh allegation levied by the Hindenburg Research, the Adani Group described the the U.S.-based short seller’s report as “a recycling of discredited claims that have been thoroughly investigated, proven to be baseless and already dismissed by the Hon’ble Supreme Court in January 2024.”

On Saturday, Hindenburg alleged that the chairperson of India’s stock market regulator SEBI, had a stake in obscure offshore entities used in what it alleged was ‘the Adani money siphoning scandal’. The fresh charges came almost 18 months after Hindenburg Research flagged allegations of malfeasance and stock price manipulation at the Adani group of companies, which the SEBI chief Madhabi Buch was in charge of probing.

Also read | SEBI chief Madhabi Buch, husband deny Hindenburg allegations as ‘baseless’

Citing documents from a whistleblower, Hindenburg Research alleged that Securities Exchange Board of India (SEBI) chairperson Madhabi Buch and her husband, Dhaval Buch, held stakes in offshore Bermuda and Mauritius funds through complex structures. Weeks ahead of her appointment as a whole time SEBI member in 2017, Mr. Dhaval Buch had written to a Mauritius fund administrator to make him the “sole person authorised to operate the accounts”, Hindenburg alleged.  

In a filing dated August 11, the Adani Group spokesperson informed stock exchange that its overseas holding structure is “fully transparent”, with all relevant details disclosed regularly in numerous public documents. The spokesperson said that Adani Group has “absolutely no commercial relationship with the individuals or matters mentioned in this calculated deliberate effort to malign our standing”.

 The latest allegations by Hindenburg Research are malicious, mischievous, and manipulative selections of publicly available information to arrive at pre-determined conclusions for “personal profiteering with wanton disregard for facts and the law”, the Adani Group spokesperson said.

“We remain steadfastly committed to transparency and compliance with all legal and regulatory requirements.”

In January 2023, Hindenburg published a report accusing the Adani Group of financial irregularities, leading to a significant drop in the company’s stock price. The group at the time had rubbished these claims.

The Hindenburg report alleged stock manipulation and fraud by the conglomerate. The case is related to the allegations (part of a report by Hindenburg Research) that Adani had inflated its share prices. After these allegations were published, there was a sharp fall in the shares of various Adani group companies’ stocks.

In January 2024, the Supreme Court refused to transfer the probe into the allegations of stock price manipulation by the Adani group to an SIT and had directed market regulator SEBI to complete its probe into two pending cases within three months.

Earlier this year the SC also dismissed a plea seeking to review the verdict that had sought investigation by the market watchdog SEBI in the Adani-Hindenburg case.