barely two days before the expiry of the time limit set by the Supreme Court for the investigation of the allegations raised Hindenburg Research on Misdeeds and Violations of Stock Market Regulations by Adani Group The Securities and Exchange Board of India (SEBI) has asked for at least six more months Ask the Court to finalize its findings. Following a bloodbath in the prices of most Adani Group shares following the publication of the Hindenburg report in late January, the Court responded to a public interest litigation and set up a committee to investigate the causes of investor losses and address regulatory failures. An expert committee was constituted. The SEBI chief, who termed the Hindenburg-Adani-related issues as the “elephant in the room”, was to ensure that the committee got the information it needed. Separately, the court tasked the regulator to expeditiously conclude the ongoing probe into the group for violation of its norms. It also sought to see whether the group violated minimum public shareholding norms, failed to disclose related party transactions, and manipulated stock prices. The two-month deadline set for SEBI and the expert committee, headed by former Supreme Court judge AM Sapre, expires on May 2. SEBI’s last-minute plea for more time will also affect – if not effectively derail – Justice Sapre’s deliberative panel.
The regulator has “prima facie crystallized” a few issues, which include a dozen suspicious transactions related to misrepresentation of financials, flouting of norms and possible fraud. However, it has argued that a detailed appraisal would normally take 15 months, citing the complexities of the transaction and it is trying to do it in six months. Even if the complexity card played by a professionally led independent regulator with a primary mandate to protect investor interests leaves the merit of the card, the suggested timelines are disingenuous. If SEBI submits its report to the court by this November, it will be 10 months after the Hindenburg report and almost two years after launching an inquiry into the complaints against the group. Where wrongdoing has been found, it need not take six months to confirm. Interim findings should be presented with any caveats deemed appropriate, such as interim orders on established violations (thus, informing and protecting investors) rather than condoning them in the name of highlighting the bigger picture can be passed. For an issue that has undermined the credibility of the Indian market and its governance standards on a scale unmatched by the Satyam debacle and the IL&FS fiasco, SEBI’s plea does not inspire confidence. And this is bad news for investors in India’s financial markets.