SEBI Asks SC For “More Time” To Complete Probe Against Adani

The Securities and Exchange Board of India (SEBI) has asked the Supreme Court for at least six more months to complete its investigation into allegations made by Hindenburg Research about wrongdoings and violations of stock market regulations by the Adani group, just two days before the deadline set by the Supreme Court to investigate them expires. 

The Apex Court had reacted to a PIL and established an expert committee to look into the causes of investor losses and identify regulatory failings after the carnage in the prices of the Adani group stocks following the release of Hindenburg's report in late January. 

The SEBI chief was in charge of making sure the committee got the information it requires and referred to the Hindenburg-Adani-related problems as "the elephant in the room." Separately, the Court directed the regulator to swiftly wrap up its ongoing investigation into the organisation for breaking its rules. Additionally, it sought to determine whether the group had violated the requirements for minimum public shareholding, concealed related-party transactions, and fixed stock prices. 

As per reports, the High Court judge AM Sapre-led expert committee and SEBI were given a two-month deadline that expires on 2 May. SEBI's urgent request for extra time will influence, if not completely scuttle, the Justice Sapre panel's proceedings.

The regulator has "crystallised a prima facie view" on a few matters, such as a dozen suspicious transactions that have to do with financial reporting irregularities, breaking rules, and potential fraud. However, it claims that a detailed assessment would typically take 15 months and that it is attempting to complete it in six months despite the transactions' complexity. 

The mentioned dates are deceptive, even if one disregards the legitimacy of the complexity card played by a professionally-led independent regulator with a main responsibility to defend investor interests. 

Nearly two years have passed since SEBI first began looking into complaints against the organisation, and ten months will have passed since the Hindenburg report if SEBI does submit its report to the Court by this November. Where wrongdoing has been discovered, confirmation need not take six months. In the same way that interim orders can be issued on established infractions (thereby notifying and safeguarding investors) rather of tolerating them in the name of discovering the overall picture, interim results must be disclosed with any caveats deemed appropriate. 

SEBI's petition does not instill confidence for a matter that has seriously tarnished the reputation of the Indian market and its governance norms, on a scale unsurpassed by the Satyam scandal and the collapse of IL&FS. For investors in India's financial markets, this is bad news.