I n a country where most institutions are happy being subservient to the status quo and none has the guts to call a spade a spade, it took a foreign entity to expose the prevailing muck in the entire capital market. US based agency Hindenburg Research, earlier known for its expose on the Adani group perceived as being close to the Prime Minister, has this time pointed fingers directly at none other than the head of the country’s capital markets regulator. In a broadside against the chairperson of the Securities and Exchange Board of India (SEBI), Madhabi Puri Buch, the agency has alleged that she and her husband Dhaval Buch had stakes in offshore funds connected to the Adani scandal. Hindenburg, citing whistleblower documents, says that the Bermudabased Global Opportunities Fund, which a Financial Times investigation found was used by entities close to the Adani group to trade shares in the group companies, had sub-funds. Buch and her husband invested in one of these sub-funds in 2015. In 2017, her husband applied to become the sole operator of the account, before Buch was appointed a fulltime member of SEBI.
In 2018, Buch wrote an email seeking to redeem all her husband’s investments in the fund. And in 2022, she was appointed the head of SEBI. Hindenburg then cited the Supreme Court order to point out that SEBI had “drawn a blank” in its investigation into who had provided funds to Adani’s offshore shareholders. “If SEBI really wanted to find the offshore fund holders, perhaps the SEBI chairperson could have started by looking in the mirror,” SC had said. “We find it unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson.” The Buchs have vehemently denied the allegations as baseless and asserted that their finances are an open book. In a statement, the couple also said it is unfortunate that Hindenburg Research against whom SEBI has taken an enforcement action and issued a show cause notice has chosen to attempt character assassination of the chairperson in response to the same. Hindenburg Research, which has built up a reputation as a ‘David’ taking on corporate ‘Goliaths,’ had in January last year come out with a scathing report blaming the Adani group for “the biggest con in corporate history.” The report set off a gigantic decrease in the group’s stock prices, wiping out roughly $86 billion in market capitalisation. This time the charges are not against any particular company but against the head of the capital markets regulator itself. This raises serious questions on our entire financial system and the economy.
In a country where the banking system is already facing trust deficit from citizens, as evident from the dwindling bank deposits, such allegations against the capital markets regulator could lead to a drop in the overall investor confidence. Such reputation damage would also put off foreign investors and the results would be detrimental to the whole economy. The government must initiate a probe into the allegations and, as rightly demanded by the Opposition, eliminate conflicts of interest in the regulator’s investigation of the Adani group and form a Joint Parliamentary Committee for a thorough probe into the entire “scam.” The government should act to restore investor confidence and not just wait for the issue to die down, as is generally the case.