Remain calm and exercise due diligence before reacting: Sebi to Dalal Street investors after Hindenburg report

In the backdrop of US-based short seller Hindenburg Research leveling a barrage of allegations against Sebi chairperson Madhabi Puri Buch and her husband Dhaval Buch, charges categorically denied by the duo, the capital market regulator urged investors to remain calm and exercise due diligence before reacting. “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,” said the market regulator. 

“Notably, the allegations made by Hindenburg Research, against the Adani Group, have been duly investigated by SEBI,” it said. 
It also mentioned a January 3 order by the Supreme Court that noted that Sebi had completed 22 out of 24 investigations into the Adani group. “Subsequently, one more investigation was completed in March 2024, and one remaining investigation is close to completion,” Sebi added. 

It also pointed out that during the ongoing investigation in the matter, more than 100 summons, around 1,100 letters and emails were issued to seek information. “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,” said Sebi.

The report also seeks to question Sebi's action in issuing a show-cause notice to Hindenburg Research on June 27. The show-cause notice in question, alleging violations of securities laws by Hindenburg Research, has been issued by following the due process of the law, according to SEBI.

“It is noted that Hindenburg Research has itself made the show-cause notice issued to it available on its website. The show-cause notice contains the reasons for its issuance. The proceedings in this matter are ongoing and the same is being dealt with in accordance with the established procedure and in compliance with the principles of natural justice,” Sebi stressed.

It also asserted that it 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, and the Chairperson has also recused herself in matters involving potential conflicts of interest, it said. 

Over the years, Sebi has built a robust regulatory framework that “not only aligns with best global practices but also ensures protection of investors”, and remains committed to ensuring the integrity of the country’s capital markets, as well as their orderly growth and development.

Meanwhile, following statements made by the Buchs concerning allegations raised by Hindenburg Research on August 10, the US short seller posed new questions for the Sebi Chairperson alleging that her response contained several significant admissions and raised critical new questions. In a social media post on microblogging site X (formerly Twitter), the US-based firm said that the Sebi Chairperson’s response to its report includes “several important admissions and raises numerous new critical questions”.