Hindenburg Research’s latest allegations may weaken SEBI Chairperson Madhabi Puri Buch’s case for a reappointment next year, should she seek one, said market observers.
“The government would have to stand by her and justify that she’s innocent and a scapegoat. It’ll be easy for the government to nominate someone with a clean track record rather than spend time in justifications. And, then, there is the question of institutional integrity,” said a securities lawyer.
A whole time member from April 5, 2017 to October 4, 2021, Buch assumed charge as Chairperson on March 2, 2022. Her three-year tenure ends in March next year, unless she is given an extension.
“She holds a public office, and that too, of a regulator of public markets, where interests of minority shareholders are sought to be protected. Allegations of these nature require a thorough investigation and till such time it is completed, she should vacate her chair, on moral grounds. Given that offshore structures are layered and complex, she should volunteer every information in the interest of transparency,” said an industry official.
‘Disconnected past events’
Sumit Agrawal, Founder at Regstreet Law Advisors and a former SEBI Officer said the allegations raised by Hindenburg appear to be speculative, relying on disconnected past events that bear no relevance to SEBI’s institutional decisions.
“Neither SEBI nor its Chairperson should feel compelled to respond to these accusations. It is evident that these allegations will be politically exploited, likely leading to calls for the non-extension of the incumbent’s term which ends in March 2025 or demanding a special investigation. It wouldn’t be a surprise if there are public interest litigations filed on this in the Supreme Court,” Agrawal said.
He added that such practices can unjustly tarnish reputations that have been built over time, showing how easily unrelated information can be twisted to fabricate a misleading narrative about regulatory decision-making.
According to Hindenburg, SEBI Chairperson and her husband had stakes in a multi-layered offshore fund structure with miniscule assets, traversing known high-risk jurisdictions. The fund was overseen by a company with reported ties to the Wirecard scandal, in the same entity run by an Adani director, and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal.
“The key allegation about her holdings in offshore funds is that of non-disclosure. Allegations of her husband joining Blackstone as a senior advisor without any experience in real estate and SEBI implementing a raft of REIT legislations, of significant benefit to Blackstone as one of the largest REIT sponsors in India are based on innuendo rather than any proof,” said the securities lawyer.
Buch and her husband denied the allegations in a statement on Sunday: “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... We would be issuing a detailed statement in due course.”
At SEBI, Buch has tried to inculcate a culture that is more closely aligned with the corporate world. The thrust has been on leveraging technology and formulating regulations backed by data.
Her style of functioning, however, has led to some discomfort among employees and the pace of regulatory changes has drawn pushback from sections of the industry, said market observers.
Concerns on impulsive policy-making
The first two years of her tenure as Chairperson saw 90 consultation papers, some of which encountered delays or substantial modifications, raising concerns on impulsive policy-making. The regulator, however, has turned its focus to ease of doing business in the past few months.
Two employee associations recently denied media reports of internal unrest among employees, describing the claims as misplaced and fuelled by a few disgruntled persons.