Sebi Chairperson Madhabi Puri Buch should step down as the recent turn of events is not "not good for the reputation" of the country's market regulator, former Finance Secretary SC Garg said in an exclusive interaction with Zee Business. His remarks come against the backdrop of a barrage of allegations by US-based short seller Hindenburg Research that Buch and her husband Dhaval Buch previously held investments in offshore funds also used by the Adani group—charges categorically denied by the couple—and suggesting a conflict of interest in her investigations surrounding the conglomerate due to such investments.

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In Garg's view, the government should investigate the matter closely. "The situation creates a lot of doubt... People can raise concerns about whether investigations became slower at the suggestion of the government... The government should form a new committee comprising a judge, reputed former officials of Sebi and market representatives, and be made to probe the Adani case," he said. 

Highlighting the importance of forming such a panel to investigate the matter, he said: "How can Sebi be trusted now? I don't remember if Buch's or any other board member's disclosure was ever placed before the board. How can a whole-time member take up any other responsibility or draw additional income?"

The Buchs have rejected the allegations. After releasing a statement immediately after the release of Hindenburg's report last week, the Buchs released a more detailed statement containing a host of specific details including their career history, education, and certain investments. Hindenburg Research is attempting to attack Sebi's credibility and indulging in attempted character assassination of its chairperson, the couple wrote, having already described the allegations as "baseless" and "devoid of any truth". The Sebi chairperson termed the allegations of a conflict of interest as an attempt at "character assassination".

Garg's remarks also come at a time when several foreign investors have raised concerns regarding the latest Hindenburg report, which contains several allegations against the Sebi chief and her husband. Among them, eminent market expert Mark Matthews has said that he would see what the Supreme Court had to say on the matter. "I cannot see any evidence to support impropriety" in those accusations, said Matthews.   

ALSO READ: Hindenburg attacking Sebi credibility, indulging in character assassination attempt of its chairperson, say Buchs 

In its report, released about 18 months after it accused the Adani group of financial misconduct and stock manipulation, the US-based short seller alleged, citing whistleblower documents, that the Buchs held stakes in an offshore fund where a substantial amount of money was invested by associates of Vinod Adani, brother of Adani group chairman Gautam Adani. The Adani group has denied the accusations. 

Capital market regulator Sebi asked investors to remain calm and exercise due diligence before reacting to such reports. 

Mutual fund industry body AMFI also came in support of the Sebi chairperson, saying that the US short-seller is trying to create a trust deficit in the market ecosystem.

With inputs from agencies