Here is the full text of Sebi’s statement:
SEBI took note of a report published by Hindenburg Research on August 10, 2024.
Investors should remain calm and exercise due diligence before reacting to such reports. Investors may also wish to note a disclaimer in the report stating that readers should assume that Hindenburg Research has short positions in the securities covered in the report.
The report, among other things, claims that SEBI has not taken any action against the Adani group. It questions SEBI’s action in issuing a show cause notice to Hindenburg Research on June 27, 2024. It further claims that SEBI has made changes in the SEBI (REIT) Regulations 2014 to benefit various multinational financial conglomerates.
These issues merit a response.
It may be mentioned that the allegations made by Hindenburg Research against Adani Group have been properly investigated by SEBI.
The Hon’ble Supreme Court in its order dated January 3, 2024 noted that SEBI has completed twenty-two out of twenty-four investigations of the Adani Group. Subsequently, one more investigation was completed in March 2024, and the remaining one is nearing completion. During the ongoing investigation in this matter, more than 100 summons, 1100 letters and emails have been issued to get information. In addition, more than 100 communications have been made seeking assistance from local/foreign regulators and external agencies. Also more than 300 documents containing about 12,000 pages have been examined.
It may be noted that after completion of investigation, SEBI initiates enforcement proceedings which are quasi-judicial in nature. This includes issuing show cause notices and giving an opportunity of hearing which culminates in the passing of a speaking order. Such an order is then made available in the public domain. Where investigations have been completed, enforcement proceedings are ongoing and appropriate action is being taken in accordance with applicable securities laws. SEBI, as a matter of policy, refrains from commenting on any investigation/ongoing enforcement matter.
The report also questioned SEBI’s action in issuing a show cause notice to Hindenburg Research on June 27, 2024. The Show Cause Notice in question, alleging violation of securities laws by Hindenburg Research, has been issued following due process. The law is notable in that Hindenburg Research itself has made the show cause notice issued to it available on its website. The show cause notice shall contain the reasons for its issuance. Proceedings in the matter are ongoing and are being conducted in accordance with the established procedure and in compliance with the principles of natural justice.
The report also states that implementation of SEBI (REIT) Regulations 2014 as well as changes in such regulations have significantly benefited large multinational financial conglomerates. In this context, it may be noted that the SEBI (REIT) Regulations, 2014 have been amended from time to time.
As in all cases involving the introduction of new regulations or amendments to existing regulations, there is a robust consultation process to seek inputs and feedback from industry, investors, intermediaries, relevant advisory committees and the general public. Only after consultation, introduction of new regulation or proposal for modification of existing regulation is placed for consideration and discussion of SEBI Board. The rules are notified after the approval of the SEBI Board. As a measure of transparency, agenda papers for board meetings and results of board discussions are also published on SEBI’s website. Hence, claims that such rules, changes in rules or circulars issued regarding REITs were in favor of a large multinational financial conglomerate, are unwarranted.
For the development of the Indian securities market, SEBI has at various times underlined the potential of REITs, SM REITs, InvITs and Municipal Bonds among other asset classes for democratization of markets, monetization of household savings and capital formation through capital markets. These have also been highlighted in SEBI’s latest annual report, as part of the Chairperson’s statement (see paragraphs titled ‘Financial inclusion and democratization of markets’ and ‘New avenues for capital formation’). Therefore, SEBI’s claim that the promotion of REITs and SM REITs among various other asset classes was only to benefit a large multinational financial conglomerate, is untenable.
Finally, it is emphasized that SEBI has adequate internal mechanisms to address issues related to conflict of interest, including a disclosure framework and provision for recall. It is noted that necessary relevant disclosures regarding holding of securities and their transfer have been made by the Chairman from time to time. The Chairman has also recused himself from matters relating to potential conflicts of interest.
SEBI, over the years, has built a robust regulatory framework that not only aligns with global best practices but also ensures investor protection.
SEBI is committed to ensuring the integrity of India’s capital markets and its orderly growth and development.
Also Read | Explained: Who are the Hindenburg people and why are they after SEBI chief Madhabi Puri Buch?
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