SEBI responds to Hindenburg allegations, says Madhabi Buch disclosed material information about securities held

A day after US short-term trading firm Hindenburg Research fired a salvo at Madhabi Puri Buch, chairwoman of the Securities and Exchange Board of India (SEBI), and her husband Dhaval Buch, the market watchdog swung into action, issuing separate statements in response to some of the allegations.

In January 2023, Hindenburg published a report against Adani Group accusing Gautam Adani, the CEO of the airport energy group, of committing the biggest fraud in corporate history.

In a latest report on Saturday, Hindenburg said that despite the evidence, SEBI has not taken any public action against Adani Group.

In its response on Sunday, the market regulator pointed to the Supreme Court order of January 3, which said SEBI had completed 22 of the 24 investigations into Adani Group. Subsequently, another investigation was completed in March 2024, while one remaining investigation is close to completion, it said.

“During the ongoing investigation into this matter, more than 100 summonses, approximately 1,100 letters and emails were issued seeking information. In addition, more than 100 communications were sent to domestic/foreign regulatory authorities and external agencies requesting assistance,” it said.

SEBI also said that over 300 documents containing around 12,000 pages were examined.

“Where investigations have been completed, enforcement proceedings are ongoing and appropriate actions are being taken in accordance with applicable securities laws,” the statement said.

Hindenburg alleged that when Dhaval Buch was a senior adviser at Blackstone and Madhabi Buch was a SEBI official, Blackstone-backed real estate investment trusts — Mindspace and Nexus Select Trust — received approval from the market regulator to list on the stock exchange.

Hindenburg further alleged that during the time Dhaval Buch was an advisor to Blackstone, SEBI proposed, approved and facilitated significant changes to the REIT regulations.

The regulator in its response said that the SEBI (REIT) Regulations, 2014 have been amended from time to time. It also emphasised that when it comes to issuing new regulations or amending existing ones, a robust consultation process is in place to seek feedback and views. Only after consultation, a proposal to introduce a new regulation or amend an existing regulation is placed before the SEBI Board for consideration and deliberation, it noted.

“The allegations that such regulations, changes in regulations or circulars issued in relation to REITs were intended to favour one large international financial conglomerate are misplaced,” SEBI noted.

The regulator also said that it has repeatedly highlighted the potential of instruments like REITs, SM REIT InvITs (Infrastructure Investment Trusts) and municipal bonds for the development of the Indian securities market. Therefore, the claim that the promotion of REITs and SM REITs among various other asset classes by SEBI was only aimed at benefiting one large international financial conglomerate is also incorrect.

SEBI said it has appropriate internal mechanisms to address conflict of interest issues, including a disclosure framework and exemption provisions.

“It should be noted that the relevant disclosures required in relation to securities holdings and transfers have been made by the Chairwoman from time to time. The Chairwoman has also recused herself in matters concerning potential conflicts of interest,” it reads.

SEBI also said the show cause notice issued earlier to Hindenburg alleging violations of securities laws was issued in accordance with due process of law. The proceedings in the matter are pending and are being disposed of as per the established procedure and in accordance with the principles of natural justice, it added.