August 12th 2024.
In a country where many institutions are hesitant to speak up and challenge the norm, it may come as a surprise that it took an outside entity to expose the underlying corruption in the capital market. That's right, a US-based agency called Hindenburg Research, known for its past revelation on the Adani group's close ties with the Prime Minister, has now shifted its focus to none other than the head of the Securities and Exchange Board of India (SEBI), Madhabi Puri Buch. In a strong criticism against Buch, the agency has alleged that she and her husband had invested in offshore funds connected to the Adani scandal. According to Hindenburg, these funds were used by Adani-associated entities to trade stocks in Adani companies. This revelation was based on documents provided by a whistleblower.
Hindenburg pointed out that in 2015, Buch and her husband invested in one of the sub-funds of the Bermudabased Global Opportunities Fund. Two years later, Buch's husband applied to become the sole operator of the account, just before Buch was appointed as a full-time member of SEBI. In 2018, Buch wrote an email requesting to redeem all her husband's investments in the fund. And, in a twist of fate, in 2022, she was appointed as the head of SEBI. This raises serious questions about the integrity of the country's capital market regulator.
Interestingly, Hindenburg cited a Supreme Court order that stated that SEBI's investigation into the source of funds for Adani's offshore shareholders came to a dead end. The court had also observed that SEBI seemed hesitant to look into its own chairperson's involvement in the matter. The Buchs have denied these allegations and stated that their financial records are transparent. They have also accused Hindenburg of attempting to tarnish Buch's reputation in response to SEBI's actions against them.
Hindenburg Research, known for taking on corporate giants, had previously published a report accusing the Adani group of being involved in "the biggest con in corporate history." This report caused a significant drop in the group's stock prices, erasing a staggering $86 billion from their market value. However, this time, the allegations are not against a particular company but against the head of the capital markets regulator. This casts a shadow of doubt on the entire financial system and could potentially harm the economy.
In a country where the trust in the banking system is already dwindling, as evident from the decreasing bank deposits, these allegations against the capital markets regulator could further erode investor confidence. This could discourage foreign investors and have adverse effects on the economy. It is crucial for the government to investigate these allegations and address the issue of conflict of interest in SEBI's investigation of the Adani group. As demanded by the opposition, a Joint Parliamentary Committee should be formed to conduct a thorough probe into this scandal. The government must take swift action to restore investor confidence instead of waiting for the issue to die down, as is often the case.
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