The Securities and Exchange Board of India said on Sunday that its chairperson Madhabi Buch disclosed details about her security holdings and recused herself in matters that potentially involved a conflict of interest.

The regulator made the statement a day after American short-seller Hindenburg Research alleged that Madhabi Buch and her husband Dhaval Buch had “hidden stakes” in offshore entities tied to stock price manipulation and money laundering by the Adani Group.

Madhabi and Dhaval Buch denied the allegations in a statement to the press. Hindenburg Research, however, said that their response included several important admissions and raised numerous new critical questions.

The Securities and Exchange Board of India said on Sunday that it has adequate internal mechanisms for addressing any conflict of interest, which include a “disclosure framework and provision for recusal”.

The market regulator urged investors to remain calm and exercise due diligence before reacting to reports such as the one by Hindenburg. “Investors may also like to take note of the disclaimer in the report that states that readers should assume that Hindenburg Research may have short positions in the securities covered in the report,” it added.

The market regulator, responding to Hindenburg’s allegation of inaction against the Adani Group, said that it investigated the American short-seller’s allegations against the conglomerate.

On January 24, 2023, Hindenburg published a report alleging that the Adani Group was involved in accounting fraud and money laundering. The Adani Group rejected the allegations, but the report hurt the stock prices of its listed companies and had wiped out more than $100 billion in investors’ money.

The Supreme Court ordered the Securities and Exchange Board of India to conduct an inquiry into the matter in March last year.

The Securities and Exchange Board of India on Sunday referred to a Supreme Court order from January 3 which noted that it had completed 22 out of the 24 investigations into the Adani Group. It added that one more investigation was completed in March, and the remaining one was close to completion.

Hindenburg Research on Saturday said that Sebi sent it a show-cause notice on June 27, but did not allege any factual errors in its analysis. The market regulator, however, said that the notice was issued after following the due process of law.

The documents accessed by Hindenburg Research also suggest a quid pro quo arrangement between Sebi and the private equity group Blackstone, where Dhaval Buch was appointed as an advisor in July 2019 – despite his apparent lack of experience in real estate or capital markets.

After Madhabi Buch became its chairperson in March 2022, the Securities and Exchange Board of India proposed or implemented a raft of legislations in connection with Real Estate Investment Trusts, or REIT, a category of investments that is still nascent in India.

On this, Sebi said that a “robust consultation process” is held before introducing or amending any regulations. The market regulator said it was “inappropriate” to claim that regulations on Real Estate Investment Trusts were changed to favour one conglomerate.

Attempt at character assassination, claims Sebi chief

Madhabi and Dhaval Buch on Sunday denied Hindenburg’s allegations, describing them as baseless. They claimed that the American short-seller chose “to attempt character assassination” in response to Sebi’s show cause notice to it.

Hindenburg Research had claimed that wealth management firm IIFL facilitated the setting up of obscure offshore fund structures, which helped channel illicit funds allegedly siphoned by the Adani Group back into Indian markets. It said that Madhavi and Dhaval Buch had stakes in IIFL.

The couple, however, said on Sunday that the investments were made in 2015, when both of them were private citizens.

“The decision to invest in this fund was because the Chief Investment Officer, Anil Ahuja, is Dhaval’s childhood friend from school and IIT Delhi and, being an ex-employee of Citibank, JP Morgan and 3i Group plc, had many decades of strong investing career,” they said.

Madhavi and Dhaval Buch added that the fund in question, IPE-Plus Fund 1, did not invest in any bond, equity or derivative of the Adani Group.

Rebuttal raises new questions, says Hindenburg

Hindenburg Research said that Madhavi and Dhaval Buch’s statement had key admissions and raised new questions.

“Buch’s response now publicly confirms her investment in an obscure Bermuda/Mauritius fund structure, alongside money allegedly siphoned by Vinod Adani [brother of Adani Group chairperson Gautam Adani]” the United States-based firm said.

“SEBI was tasked with investigating investment funds relating to the Adani matter, which would include funds Ms. Buch was personally invested in and funds by the same sponsor which were specifically highlighted in our original report,” Hindenburg said. “This is obviously a massive conflict of interest.”

Madhabi Buch had claimed that two consulting companies she set up, including offshore Singaporean consulting firm Agora Partners, “became immediately dormant on her appointment with SEBI” in 2017, with her husband taking over starting in 2019.

“Per its latest shareholding list as of March 31st, 2024, Agora Advisory Limited (India), is still 99% owned by Madhabi Buch, not her husband,” Hindenburg said. It added that Madhabi Buch remained a 100% shareholder of Agora Partners Singapore until March 16, 2022 and that she only transferred her shares into her husband’s name two weeks after she was named as the Sebi chief.

Madhabi Buch took over as the chairperson of the Securities and Exchange Board of India on March 2, 2022.

Also read: SEBI chief should have recused herself from Adani investigation, say experts