SEBI urges investors to stay calm amid Hindenburg report

The Securities and Exchange Board of India (SEBI) has told investors to remain calm and exercise due diligence before reacting to Hindenburg Research’s reports.

Investors may also like to 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, the market regulator says.

SEBI says the allegations made by Hindenburg Research against Adani Group have been duly investigated.

“Supreme Court in its Order of January 3, 2024 noted that SEBI had completed twenty–two out of twenty–four investigations into the 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,” the market regulator says.

“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 adds.

This comes after Hindenburg alleged that SEBI has not taken any action against the Adani group. It questioned SEBI’s action of issuing a show cause notice to Hindenburg Research on June 27, 2024. It further claimed that SEBI has made changes to the SEBI (REIT) Regulations 2014, in order to benefit a diversified multinational financial conglomerate.

SEBI noted that relevant disclosures required in terms of holdings of securities and their transfers have been made by its chairperson Madhabi Puri Buch from time to time. Buch has also recused herself in matters involving potential conflicts of interest, the market watchdog says.

Hindenburg also alleged that changes in REIT regulations were done to favour Blackstone, where Buch's husband Dhaval works as an adviser. Responding to the allegations, SEBI says, “As with all cases involving introduction of a new regulation or amendment to an existing regulation, a robust consultation process for seeking inputs and feedback of the industry, investors, intermediaries, relevant Advisory Committee and the public at large is in place. Only after consultation, a proposal for introduction of a new regulation or change in the existing regulation is placed for the consideration of and deliberation of the SEBI Board. Regulations are notified after approval of the SEBI Board. As a measure of transparency, the agenda papers for Board meetings and outcomes of Board discussions are also published on SEBI website. Hence, claims that such regulations, changes to regulations or circulars issued related to REITs were to favour one large multinational financial conglomerate, are inappropriate.”

SEBI chairperson and her husband Dhaval Buch in a press statement on Sunday said all disclosures as required have already been furnished to SEBI over the years. “We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them. Further, in the interest of complete transparency, we would be issuing a detailed statement in due course. It is unfortunate that Hindenburg Research against whom SEBI has taken an Enforcement action and issued a show cause notice has chosen to attempt character assassination in response to the same," the statement said.