Sebi: Have mechanisms to fix conflict of interest issues
Sebi has asked investors to take an informed decision before reacting to such reports.”It is emphasised that Sebi has adequate internal mechanisms for addressing issues relating to conflict of interest, which include disclosure framework and provision for recusal. It is noted that relevant disclosures required in terms of holdings of securities and their transfers have been made by the chairperson from time to time. The chairperson has also recused herself in matters involving potential conflicts of interest,” Sebi said.
Sebi release also, in detail, produced relevant data, to deny Hindenburg’s allegations that the regulator had not taken any action against Adani Group. The report had also questioned Sebi’s action of issuing a show-cause notice to the US-based short-seller.
“…Sebi had completed 22 out of 24 investigations into Adani Group. Subsequently, one more investigation was completed in March 2024, and one remaining investigation is close to completion. During the ongoing investigation in this matter, more than 100 summons, around 1,100 letters and emails have been issued to seek information. Further, more than 100 communications have been made seeking assistance from domestic/foreign regulators and external agencies. Also more than 300 documents containing around 12,000 pages have been examined,” it said, adding that enforcement proceedings have also been initiated where the probe has been completed.
On June 27, Sebi’s show-cause notice to Hindenburg had, among other issues, pointed out that before the release of Hindenburg first report against Adani Group on Jan 24, 2023, a fund run by Kingdon Capital had built short positions in the group’s companies. These positions were built based on a report by Hindenburg that was shared with the fund before it was released publicly.
The positions were squared off by Feb 22, 2023, at a profit of about Rs 183 crore. As part of the deal, Hindenburg received a 25% profit from Kingdon Capital.
Sebi believed such gains were illegal and hence had issued to Hindenburg and some other related entities as to why legal actions should not be initiated against them. Sebi had also asked the entities to disgorge those ill-gotten gains.
There are several people in the market who believe that Hindenburg’s latest report against the Sebi chairperson was mainly to get back to the regulator for issuing the show-cause notice .
In its release, Sebi also denied it had changed any regulations for REITs “to benefit a diversified multinational financial conglomerate”. Hindenburg had alleged that some changes to rules were made to benefit global financial giant Blackstone since Dhaval Buch, husband of Sebi chairperson, was employed by its India arm.
