How US indictment opens door for SEBI action against Adanis

NT Correspondent

New Delhi

The US Department of Justice indictment against Gautam Adani and others has opened the doors for the Securities and Exchange Board of India (SEBI) to potentially take strict action against them, including suspending the trading of Adani Group stocks, banning the executives of the company from accessing the stock market, and seizing some of their assets, reports The Print. According to the indictment, the Adani Group and its subsidiary Adani Green Energy—listed on Indian stock exchanges allegedly violated fair practice norms laid out by the SEBI by “falsely” stating in the media and in stock exchange filings that it had no knowledge of a US investigation into Gautam Adani, and that it had received no communications from the American authorities regarding this. The Indian market watchdog has two broad regulations that deal with fair practice norms and disclosure requirements the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Between them, the regulations prescribe what constitute unfair trade practices, violations of the disclosure norms, and the penalties for these actions. According to the indictment, Federal Bureau of Investigation (FBI) special agents on 17 March 2023 approached Sagar Adani, an executive director of Adani Green Energy and nephew of Adani Group chairman Gautam Adani. They provided him a copy of a judic ial ly authorised search warrant and a grand jury subpoena and took into their custody Sagar Adani’s electronic devices. A subpoena is basically a writ ordering a person to appear in court. The indictment, in particular, took note of a news report by Bloomberg, published on 15 March 2024 about a year after the search warrant and subpoena were issued in which the Adani Group was quoted as saying: “We are not aware of any investigation against our chairman”. This statement in the media by the Adani Group could itself potentially breach SEBI’s unfair trade practises norms, securities law experts said.

According to the norms, a person would be in violation of the norms if, among other things, they are “disseminating information or advice through any media, whether physical or digital, which the disseminator knows to be false or misleading in a reckless or careless manner and which is designed to, or likely to influence the decision of investors dealing in securities”. However, a breach of this rule could hinge on whether the company was being “reckless or careless”, the experts explained. Under the fair practices rules, the SEBI board, chairperson, or executive director can launch an investigation into whether “any intermediary or any person associated with the securities market has violated any provisions of the Act.''