Buch should quit SEBI

Hindenburg Research recently fired a fresh salvo making serious allegations against SEBI Chairperson Madhabi Puri Buch, claiming she and her husband had stakes in offshore fundslinked to the Adani Group.

These funds were allegedly involved in a money siphoningscandal. Hindenburg also suggested that the REIT framework established by SEBI benefits aselect few, including Buch’s husband, who has ties to private equity firm Blackstone.

The US short seller Hindenburg Research continuing its broadside against the Indian marketregulator SEBI chief wants her to come clean on the clients of a consulting firm in which sheheld stake.

These allegations have caused some ripples in INDIA block which has asked Buchto quit in all fairness as she held stake in a consulting firm even while being in office. She hitback at Hindenburg saying the latest tirade as an attack on the credibility of Sebi andattempted “character assassination.”

Her defense is weak and not convincing. Most of the small investors have put in their lifesavings in the market and they deserve a watchdog who is fair and just. They feel that the Hindenburg allegations against the chairperson of SEBI have created an ‘atmosphere ofdoubt’.

Buch has to take note of this rather than take comfort and feel protected by thegovernment. It may be noted that the Finance Ministry, in its first official response to this murky affairexposed by the US Short seller, stated that the comprehensive statements by the capitalmarkets regulator and its chief on Hindenburg Research’s latest conflict-of-interestallegation leaves little room for immediate additions.

The economic affair secretary infinance ministry Ajay Seth told reporters that ‘Sebi has reacted, government has nothingfurther to add.’ Ajay Seth is also on the Board of Sebi.

It appears that the finance ministryhas swept the allegations against SEBI chief under the carpet and washed its hands off andcreated a sort of opaqueness to shield the watchdog and leave the small investors wretchedunfortunate. The story does not end here.

A public document reviewed by Reuters claims that the SEBI chief, according to companyrecords for the financial year ending March 2024, continued to earn revenue from a consultancy firm during her seven-year tenure, potentially breaching rules for the regulatoryofficials.

Buch joined Sebi in 2017 and was appointed to the top post in March 2022. Ananalysis of public documents from the registrars of Companies by Reuters reveals that inthose seven years, Agora Advisory Pvt Ltd in which Buch has 99% shareholding, earned arevenue of Rs. 3.71 crore ($442.025).

Buch’s holdings potentially violate a 2008 Sebi policythat prohibits officials from holding an office of profit, receiving salary or professional feesfrom other professional activities.

Buch’s silence will not hide certain facts. Hindenburg, citing Singapore company records,states that Buch transferred all her shares in Agora Partners to her husband in March 2022. However, according to company records for the financial year ending March 2024, Buch stillholds shares in the Indian consulting firm.

Subash Chandra Garg, a former top bureaucrat and a Sebi Board member during Buch’stenure, described her equity in the firm and its continued business operations as a “veryserious” breach of conduct. Garg says there is no justification for her to continue to own thefirm after she joined the board.

She could not have been allowed even after makingdisclosures.”“This makes her position completely untenable at the regulator.”

Buch has not clarifiedwhether she was granted a waiver to retain her shareholding in the Indian consulting firm. Industry bodies representing REITs and alternate capital have rallied behind Buch,dismissing Hindenburg’s claims as misleading.

No matter who is defending her, she must beabove board and quit the post to make SEBI a fair watchdog.