India’s SEBI Chief Madhabi Puri Buch Under Scrutiny for Potential Rules Violation: Documents Reveal Consultancy Earnings

As the investigation unfolds, the need for transparency and adherence to regulatory policies will be crucial in restoring public confidence in SEBI’s ability to oversee India’s financial markets impartially.

MUMBAI (India CSR): Madhabi Puri Buch, the head of India’s Securities and Exchange Board of India (SEBI), is under scrutiny for potentially violating regulatory rules by continuing to earn revenue from a consultancy firm during her seven-year tenure at SEBI. Public documents reviewed by Reuters indicate that Buch, who has been at the helm of SEBI since March 2022, maintained financial interests in Agora Advisory Pvt Ltd, a consultancy firm in which she holds a 99% stake.

This revelation has led to allegations of a conflict of interest, particularly in light of her role in ongoing investigations related to the Adani Group, a conglomerate facing scrutiny for financial irregularities.

Background: The Allegations and Hindenburg Research’s Report

Hindenburg Research, a U.S.-based shortseller known for its critical reports on corporate governance issues, has raised concerns about Buch’s continued involvement with Agora Advisory Pvt Ltd and a Singapore-based consultancy, Agora Partners, both of which are linked to her and her husband. According to the report, Buch’s financial ties to these firms could compromise her objectivity in regulatory matters, especially concerning the Adani Group.

The Adani Group, led by billionaire Gautam Adani, has been embroiled in a controversy since January last year, when Hindenburg Research published a report accusing the conglomerate of stock manipulation and accounting fraud. The allegations led to a significant drop in the share prices of Adani Enterprises and other group companies, prompting SEBI to launch an investigation.

Conflict of Interest Concerns and SEBI’s 2008 Policy

The controversy surrounding Buch’s consultancy earnings centers on SEBI’s 2008 policy, which prohibits regulatory officials from holding an office of profit or receiving professional fees from other business activities while serving in their regulatory roles. The policy is designed to prevent conflicts of interest that could undermine the integrity of the regulator.

Documents reviewed by Reuters reveal that Agora Advisory Pvt Ltd, the Indian consultancy firm in which Buch holds a majority stake, earned a revenue of 37.1 million rupees ($442,025) during Buch’s tenure at SEBI. Despite disclosing her involvement in these firms to SEBI, the continuation of business operations by these entities raises questions about whether Buch adhered to SEBI’s conflict of interest rules.

Responses and Statements from Buch and SEBI

In a statement issued on August 11, 2024, Buch denied any wrongdoing and dismissed the allegations as an attempt at “character assassination.” She clarified that her husband, who retired from Unilever in 2019, managed the consulting business through these firms and that her financial interests had been appropriately disclosed to SEBI. However, Buch did not address whether she had received a waiver from SEBI to retain her shareholding in Agora Advisory Pvt Ltd.

SEBI has not officially commented on the matter, and neither Buch nor SEBI spokespersons responded to inquiries from Reuters regarding the potential breach of rules.

Expert Opinions and the Need for Transparency

Subhash Chandra Garg, a former high-ranking bureaucrat in the Indian government and a SEBI board member during Buch’s tenure, described the situation as a “very serious” breach of conduct. Garg emphasized that Buch’s continued ownership of the consultancy firm after joining SEBI was unjustifiable and that her position at the regulator is now “completely untenable.”

Garg’s concerns are echoed by another SEBI board member, who highlighted that there was a requirement for annual disclosures of business interests by board members. However, these disclosures were reportedly not shared with the entire board for scrutiny. The board member, who spoke on condition of anonymity, pointed out that this lack of transparency undermines the credibility of the regulatory body.

Calls for Resignation and Political Reactions

The revelations have led to widespread calls for Buch’s resignation, with opposition leaders demanding accountability. In contrast, a spokesperson for the ruling Bharatiya Janata Party (BJP) dismissed the allegations as baseless, accusing Hindenburg Research of orchestrating an attack on Buch’s character.

The situation remains tense as stakeholders await further clarification from SEBI and Buch regarding the consultancy firm’s operations and whether any rules were indeed violated. The ongoing investigation into the Adani Group further complicates the matter, as any perceived conflict of interest could have significant implications for the regulatory process.

Here’s a table summarizing the key facts:

(India CSR)