Hindenburg vs Adani Saga: SEBI Chief continued to earn revenue from her firm, potentially violating regulator’s rules

The chief of the Securities and Exchange Board of India, Madhabi Buch continued to earn revenue from a consultancy firm during her seven-year tenure, potentially breaching rules for regulatory officials, according to public documents reviewed by Reuters.

In its analysis published on August 10, American short-seller Hindenburg Research noted that Buch had founded two companies prior to joining SEBI: Agora Partners, an offshore Singaporean consulting firm, and Agora Advisory, an Indian consulting firm.

Buch and her husband Dhaval claimed that the two companies had "immediately become dormant" upon her appointment as a member of SEBI. “These companies (and her shareholding in them) were explicitly part of her disclosures to SEBI,” the Buchs said in their statement on August 11.

After joining SEBI in 2017, Madhabi Buch was appointed as chief in March 2022.

A 2008 SEBI guideline states that market regulator employees are not allowed to hold profit-making positions or receive compensation or professional fees from other professional endeavours, according to Reuters.

Buch in her statement said that her husband used the consulting firms for his consulting company after retiring from Unilever in 2019 and that the consultation firms had been notified to SEBI.

Emails seeking comment were not immediately answered by Buch or the SEBI representative.

According to Hindenburg, who cited Singaporean corporate records, Buch gave her husband all of her Agora Partners shares in March 2022. Buch does, however, continue to own shares in the Indian consulting business, per corporate documents for the fiscal year that ends in March 2024.

The Reuters-reviewed records don't go into detail about the consultancy's work, and there's no evidence that these revenues were connected in any way to the Adani Group.

During Buch's stint on the SEBI board, Subhash Chandra Garg, a former top bureaucrat in the Indian government, called her equity in the company and its ongoing business operations a "very serious" breach of conduct.

"There was no justification for her to continue to own the firm after she joined the board. She could not have been allowed even after making disclosures," Garg said.

"This makes her position completely untenable at the regulator."

Buch has not clarified whether she was granted a waiver to retain her shareholding in the Indian consulting firm. A specific query to her on this was also not answered.

Opposition leaders have joined the chorus of people calling for Buch's resignation in response to Hindenburg's accusations. The ruling Bharatiya Janata Party (BJP) spokesperson described it as an unfounded attack.

Garg and a member of the SEBI board claim that none of the officials disclosed to the board anything about their commercial interests.

"There was a requirement to make annual disclosures, but board members' disclosures were not placed in front of the board for information or scrutiny," the board member said, who declined to be identified as information on disclosures to the board is not public.

"To be sure, no members' disclosures were discussed. If the disclosures were made only in front of Ajay Tyagi, the then chairperson, I am not privy to that," Garg said.

Tyagi did not respond to calls or messages asking if any disclosures had been made to him.

(with inputs from REUTERS)