"Inappropriate": SEBI On Hindenburg's REITs Allegations, Releases Statement

In response to explosive allegations by Hindenburg Research, the Securities and Exchange Board of India (SEBI) has released a detailed statement categorically rejecting claims of regulatory favouritism and conflicts of interest within its operations. The statement, issued on August 11, 2024, comes on the heels of Hindenburg’s latest report, which accuses SEBI Chairperson Madhabi Buch and her husband, Dhaval Buch, of holding stakes in offshore funds tied to the Adani Group’s alleged money-laundering scandal.

Hindenburg’s report, published on August 10, 2024, marks a continuation of its efforts to scrutinise the Adani Group, which the research firm previously described as operating “the largest con in corporate history.” The latest allegations target SEBI and its Chairperson directly, suggesting a conflict of interest stemming from the Buchs’ alleged investments in offshore funds linked to Adani. The report also criticises SEBI’s actions, particularly its handling of regulatory changes benefiting Blackstone, a multinational financial conglomerate.

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SEBI’s statement strongly refutes these claims, stressing the integrity of its regulatory processes. The agency noted that the accusations regarding SEBI’s actions in favour of specific financial entities were “inappropriate” and not reflective of the agency’s transparent regulatory framework. SEBI stated that all changes to the SEBI (Real Estate Investment Trusts) REIT Regulations 2014 were made following a rigorous consultation process, involving inputs from industry experts, investors, and the public.

SEBI highlighted that any proposed regulation or amendment undergoes thorough scrutiny before being placed before the SEBI Board for approval. This includes extensive consultations with relevant stakeholders to ensure that regulatory changes are in the best interest of the market and investors. The agency stressed that the claim that such regulations or amendments were designed to favour one large multinational financial conglomerate was not only baseless but also “inappropriate.”

Read also: Adani Group Refutes Hindenburg Claims

SEBI also addressed the specific accusations regarding the Buchs’ alleged stakes in offshore funds. The statement clarified that SEBI Chairperson Madhabi Buch has consistently adhered to the agency’s robust conflict of interest policies. SEBI asserted that Madhabi Buch had recused herself from any matters where there was a potential conflict of interest, and all relevant disclosures regarding her holdings and those of her family members had been made in accordance with SEBI’s guidelines. SEBI described its internal mechanisms for managing conflicts of interest as “adequate” and “robust,” ensuring that the regulatory body operates with the highest standards of integrity.

In its rebuttal, SEBI also pointed out the comprehensive investigations it has conducted into the Adani Group, following Hindenburg’s earlier report from January 2023. The regulatory body noted that out of twenty-four investigations into the Adani Group, twenty-three have already been completed, with the final investigation nearing completion. SEBI highlighted the extensive efforts undertaken during these investigations, including issuing over 100 summons, sending around 1,100 letters and emails, and examining more than 300 documents comprising around 12,000 pages.

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SEBI’s statement emphasised that the regulatory body has always followed due process in its enforcement actions, including issuing a show-cause notice to Hindenburg Research on June 27, 2024. This notice, which Hindenburg itself made public, was issued following the proper legal procedures, and the ongoing proceedings are being handled in compliance with the principles of natural justice, SEBI confirmed.

Read also: SEBI Under Fire As Hindenburg Report Ignites Storm: Top Leaders React

The statement also addressed Hindenburg’s criticism of SEBI’s actions concerning Real Estate Investment Trusts (REITs). SEBI reiterated that its promotion of REITs, alongside other asset classes like Small and Medium REITs (SM REITs), Infrastructure Investment Trusts (InviTs), and Municipal Bonds, aligns with its mandate to democratise markets and financialise household savings. SEBI underscored that these initiatives were part of broader efforts to foster capital formation through the capital markets, as highlighted in the latest SEBI Annual Report.

Read also: Dhaval Buch Who Has Been Named In Latest Hindenburg Report

Lastly, SEBI reassured the public of its commitment to maintaining the integrity of India’s capital markets. The agency noted that it has developed a regulatory framework that not only meets global standards but also prioritises investor protection. SEBI emphasised that it remains dedicated to ensuring the orderly growth and development of India’s capital markets, despite the challenges posed by external allegations and criticisms.

Read also: “Character Assassination”: Madhabi, Dhaval Respond to Hindenburg Report

SEBI dismissed Hindenburg’s report as lacking credibility and reiterated its commitment to upholding the principles of transparency and fairness in its regulatory activities. The agency urged investors to remain calm and exercise due diligence before reacting to such reports, while reaffirming its focus on safeguarding the interests of the Indian financial markets.

Read also: “Government Must Act To Eliminate All Conflicts Of Interest”: Congress On Hindenburg Report