Securities and Exchange Board of India chairperson Madhabi Puri Buch did not recuse herself from the market regulator’s investigation into alleged stock manipulation by the Adani Group, a SEBI board member told Scroll on the condition of anonymity.
The board member said Buch, in fact, oversaw SEBI’s Adani probe “because it was ordered by the Supreme Court”.
This contradicts SEBI’s official statement that Buch had “recused herself in matters involving potential conflicts of interest”, and opens up the possibility that the chairperson violated several SEBI regulations.
In March 2023, the Supreme Court had tasked SEBI with investigating allegations made by Hindenburg Research that Adani Group had used opaque offshore entities to route funds into India to manipulate the stock prices of its companies. The market regulator is yet to complete the probe.
On August 10, Hindenburg Research alleged the tardiness was because Buch and her husband had “hidden stakes” in the same offshore entities linked to the Adani Group that were under investigation. “We find it unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson,” the American firm said.
Dismissing the allegations as “character assassination”, the Buchs said the investments were made two years before Madhabi joined SEBI and were redeemed in 2018. Buch became a whole-time member in 2017 and was appointed as chairperson in 2022. The statement claimed “all disclosures and recusals have been diligently followed, including disclosures of all securities held or subsequently transferred”.
But the SEBI board member denied this. “Nobody in SEBI knew about these investments. It all came as a surprise,” the member said. Specifically, he pointed out that the team investigating the Adani Group did not know about Buch’s investments.
The Adani probe
All members of SEBI are expected to disclose their financial interests to the board – “specifically the secretary to the board,” the member said. A code on conflict of interests adopted by SEBI in 2008 gives the board the power to “scrutinise” the disclosures made by the chairperson. According to the SEBI board member, the board did not exercise this power with respect to Buch’s disclosures.
However, when the market regulator began the Adani investigation in 2023, Buch had an opportunity to disclose her investments in the offshore funds and recuse herself from the probe, which she did not do, according to the member.
The board member said the Adani investigation was done by “certain departments” at SEBI but “like any corporate, the chairperson would know what is going on in the departments”.
Besides, since the investigation had been ordered by the Supreme Court, Buch “had to ensure that the probe meets the timeline” set by the court.
“The probe was discussed with her informally too,” the member said, adding that at no point did Buch offer to recuse herself from these discussions.
Scroll has emailed Buch seeking her response to the board member’s allegations. We have also written to the secretary of the board seeking more clarity on the matter. The story will be updated if we receive a response.
Potential violations
The 2008 code directs members to disclose their interests at board meetings if it can lead to a conflict. “A member, who is directly or indirectly interested in any matter coming up for consideration at a meeting of the Board, shall disclose the nature of his interest at such meeting,” clause 7(1) states.
The next clause orders recusal, directing that a member “shall not take part in any deliberation or discussion of the Board with respect to such matter except to the extent of professional advice if sought by the Board.”
Section 8 of the code is more direct: “No Member shall hear or decide any matter where he has a conflict of interest.”
Buch’s failure to recuse herself from overseeing SEBI’s Adani investigation is potentially a violation of this code, and another regulation, called the Securities and Exchange Board of India (Procedure for Board Meetings) Regulations, 2001.
Section 9 of the 2001 regulation says: “Every member, who is directly or indirectly concerned or interested in any matter coming up for consideration at a meeting of the Board, shall, as soon as possible, after the relevant circumstances have come to his knowledge, disclose the nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of the Board and the member shall not take any part in any deliberation or decision of the Board with respect to that matter.”
Scroll has previously reported on August 13 that Buch continues to hold 99% shares in a Mumbai-based advisory firm. On August 16, Reuters reported that Buch’s shareholding in the firm was a possible violation of the 2008 code, which prohibits board members from holding an office of profit.
