MUMBAI: The Securities and Exchange Board (Sebi) has urged capital markets investors to remain calm and do due diligence before reacting to the latest report by Hindenburg Research, reminding them that the report includes a disclaimer that the US short-seller might be holding short positions in the securities covered.Reacting to the Hindenburg report released Saturday night accusing Sebi and its chairperson Madhabi Puri Buch of conflicts of interest that prevented the regulator from conducting a thorough examination of the stock manipulation and fraud charges against the Adani Group, Sebi said, “investors should remain calm and exercise due diligence before reacting to such reports. Investors may also 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.”Hindenburg alleged that Sebi had failed to take action against the Adani group despite allegations of financial irregularities and market fraud. It also questioned Sebi’s decision to issue a show-cause notice to Hindenburg on June 27, 2024, alleging violations of securities laws. The report further alleged that recent amendments to Reit Regulations, 2014, were made to benefit a specific multinational financial conglomerate (Blackstone) here Buch’s husband Dhaval is a senior advisor.Sebi in a two-page statement has refuted these claims, asserting that it had conducted thorough investigations into the Adani group issue and also pointed out that the Supreme Court in its January 3, 2024 order noted that Sebi had completed 22 of the 24 investigations against the Adanis. It further said another investigation was completed by March 2024, and the remaining inquiry is close to conclusion.On the show-cause notice issued to Hindenburg on June 27, 2024, Sebi said the notice followed due process of law.“It may be noted that pursuant to the completion of investigations, Sebi initiates enforcement proceedings which are quasi-judicial in nature. This comprises issuing of show cause notice and giving of an opportunity of hearing which culminates in the passing of a speaking order,” Sebi said.On the probe into the Adani saga, the statement further said, “during the ongoing investigation, 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 over 300 documents containing around 12,000 pages have been examined.”Describing the allegation that the changes made to Reits regulations were to favour Blackstone (due to Dhaval’s job there), as “inappropriate” the statement said the Reit Regulations, 2014 has been amended from time to time. “As with all cases involving the introduction of a new regulation or amendment to existing ones, a robust consultation process of seeking inputs and feedback from the industry, investors, intermediaries, relevant advisory committees and the public at large is in place. Only after detailed consultation, a proposal for the introduction of a new regulation or change in the existing one is placed for the consideration of and deliberation of the Sebi board and regulations are notified after the board approval,” Sebi noted. On the allegation that Buch as the chair has not disclosed her financial interests to Sebi, the statement said “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.”
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