The Supreme Court on Friday asked the Securities and Exchange Board of India (SEBI) and the government to produce the existing regulatory framework in place to protect Indian investors, who are reported to have lost several lakhs of crores in the past two weeks after a US-based short seller Hindenburg Research published a report which led to sudden market volatility following a meltdown in the Adani Group shares.
Assuring SEBI that it does not intend to go on a “witch hunt” and is more interested in an ‘open dialogue”, a three-judge Bench led by Chief Justice of India DY Chandrachud flagged the court’s concern for Indian investors and highlighted the need to protect them from such sudden market volatility in the future.
Chief Justice Chandrachud said the stock market was no longer a place for just “high value investors” to dabble in. “It is also a place now where a whole wide spectrum of the middle class is investing... everybody is in the market now. There is a need for circuit-breakers here like how you have in other areas,” the CJI told Solicitor General Tushar Mehta, appearing for SEBI.
“What we want to look into is whether we have a robust mechanism in place to protect Indian investors... capital is moving seamlessly, funds are flowing in and out of India... how do we ensure that what happened does not happen again in the future?” the Chief Justice asked.
The court, on the S-G’s submission, recorded that the SEBI was “closely monitoring the situation and continues to do so”. The Supreme Court clarified in its order that its observations should not be construed as a reflection on the SEBI or other statutory authorities.
The court also asked the regulator to submit a note by Monday detailing the legal and factual aspects of the existing regulatory framework for the securities market. It could also give a “threadbare analysis” of its powers and even suggest whether it needed to grow more teeth to deal with the “new world” of seamless capital movement.
If the Centre wanted, the court said it could even consider constituting an expert committee of domain experts in banking and securities along with a former judge to act as a “wise guiding force”. The court made it clear that it did not want to encroach into the policy domain. It would tread carefully, keeping a wary eye against causing any upsets in the stock market.
The court listed the case for February 13.
The Bench was hearing separate petitions filed by advocates Vishal Tiwari and ML Sharma for an investigation into Hindenburg Research’s report.