The story so far: Over a year and a half after U.S.-based Hindenburg Research alleged corporate malfeasance, stock price manipulation and breach of minimum public shareholding norms against the Adani Group of companies, the firm issued another report late last Saturday. It argued that India’s stock market regulator, the Securities and Exchange Board of India (SEBI), is reluctant to follow the trail on its charges about the use of offshore funds linked to “the Adani money siphoning scandal” because its own chairperson had a conflict of interest, having jointly invested in the same fund with her spouse.

How has SEBI responded to the charges?

SEBI Chairperson Madhabi Puri Buch and her husband, Dhaval Buch, in a statement last Sunday, said their investment in the fund flagged by Hindenburg was made during their stint as “private citizens” in Singapore, and almost two years before she joined as a SEBI member in 2017. This investment was spurred by Mr. Buch’s proximity to the fund’s Chief Investment Officer, Anil Ahuja, who was a “childhood friend”, and was redeemed in 2018 when Mr. Ahuja moved on from the role. They also cited a confirmation from Mr. Ahuja that the fund in question did not invest in any bond, equity or derivative of any Adani Group firm at any time. Mr. Ahuja was also a director of Adani Enterprises till 2017. On the U.S. firm’s charges that the SEBI chief owned two consulting firms, in Singapore and India, and transferred 100% of the Singapore outfit’s shares to her spouse in March 2022, the Buchs said these firms “became immediately dormant” on her appointment with SEBI. The transfer of the Singapore entity to Mr. Buch, who was said to have used both the entities since 2019 for his “own consultancy practice” with “prominent clients in the Indian industry”, was disclosed to SEBI as well as tax authorities in India.

In a separate statement, SEBI said that relevant disclosures required in terms of holdings of securities and their transfers have been made by Ms. Buch from time to time, and she has “also recused herself in matters involving potential conflicts of interest”, ostensibly referring to charges that the SEBI chief oversaw changes to regulations for Real Estate Investment Trusts (REITs) while her husband was an adviser to Blackstone with interests in the asset class.

SEBI also said it has completed 23 of the 24 investigations it had undertaken against the Adani Group, under the top court’s scrutiny, and the final one is close to completion.

What about the other entities?

The Adani Group reiterated that its “overseas holding structure is fully transparent, with all relevant details disclosed regularly in numerous public documents”, and noted that Mr. Ahuja was a nominee director of 3i investment fund in Adani Power (2007-08) and, later, a director of its flagship, Adani Enterprises, until 2017. 360 One, a wealth management firm formerly known as IIFL Wealth, which managed the fund IPE Plus Fund-1, named by Hindenburg, said Ms. Buch and Mr. Buch’s holdings in the fund were less than 1.5% of its total inflows, and it had made zero investments in any shares of the Adani Group either directly or indirectly through any fund.

Have fresh questions arisen since last Sunday’s set of clarifications?

Yes. Hindenburg Research said the Buchs’ statement contains important ‘admissions’ regarding the SEBI chief’s investment in an obscure fund structure run by a person who was an Adani director at the time, confirms a “massive conflict of interest” when it comes to SEBI’s probe into funds related to the Adani Group, and raises fresh questions. On the consulting firms owned by Ms. Buch, Hindenburg pointed out that Ms. Buch only transferred her stake in Singapore-based Agora Partners Singapore to her husband “two weeks after her appointment as SEBI chairperson”, and continued to hold 99% of the Indian firm that reported revenues of about $3,12,000 over three years till this March, while she was the SEBI chief. It asked if some of Mr. Buch’s consultancy clients in these were entities that SEBI is tasked with regulating, and whether they will release a full list of such clients and details of their engagements with both the consulting firms. “Finally, will the SEBI chairperson commit to a full, transparent and public investigation into these issues?” it asked.

Also read | With no remedy for Hindenburg, SEBI seems to look the other way

There has been no response yet from SEBI or the Buchs on these issues yet, while the Finance Ministry has maintained a stoic silence on the matter. While Opposition parties have continued to question the government over these allegations, fresh reports this week suggest that more sunlight may be necessary to quell any lingering doubts about any capriciousness in the administration of India’s booming securities markets. On Friday, Reuters reported that revenues accruing to Ms. Buch from the consultancy firms during her stint in SEBI, could constitute a potential breach of a SEBI policy in place since 2008. The ‘Code on Conflict of Interests for Members of Board’ says a SEBI member shall take all steps necessary to ensure that “any conflict of interest to which he may be subject to does not affect any decision of the Board”. Moreover, a member shall disclose interests which may conflict with their duties, and a whole-time member (including the chairman) shall not hold any other office of profit, nor engage in any other professional activity, which entails receipt of salary or fees.

A separate report by The Morning Context suggested that Ms. Buch did not recuse herself from a case pertaining to a firm called Essel Propack, in which a Blackstone subsidiary had acquired a 75% stake in 2019.

What may one look out for next?

Eight months ago, the Supreme Court had exuded “confidence” in SEBI’s investigation into the allegations against the Adani Group, brought to the fore by Hindenburg early last year. While noting its power to transfer an investigation from the “authorised agency” to the CBI or constitute a Special Investigation Team, the court had said this was a rare power, to be used only if there was strong evidence on record that the investigation was prima facie tainted or biased and its continuation would lead to a “failure of justice”. One of the grounds the court had highlighted for transferring an investigation was when accusations were levelled against the “top officials of the investigating agency thereby allowing them to influence the investigation”.

Ms. Buch, the first private sector executive to lead the market watchdog, has a three-year tenure that ends next March, and is eligible for a fresh term. While more clarity on the allegations around SEBI’s administration would help clear the air, expediting the sole pending investigation into the Adani Group, and swiftly following the closure of the 24 probes with enforcement proceedings culminating in “speaking orders” put in the public domain, could be the best way forward for the market watchdog.

With inputs from T. Ashokamithran.