Sebi Probing Hindenburg Research Allegations Against Adani Group

The Securities and Exchange Board of India (Sebi), the market regulator, has said, in a submission to the Supreme Court, that it is “enquiring” into the allegations made by American short-seller Hindenburg Research against the of and its impact on the markets.

In the same matter, the Central government has agreed to form an expert committee to strengthen the regulatory regime in order to ensure that market investors are protected. The had last week suggested an expert committee to look into the allegations and had asked the for its response. The top court had sought Sebi’s response on regulatory framework modification.

According to its submission note, which has been reviewed by Business Standard, said it was enquiring into market activities immediately “preceding and post the publication of the report”, to detect if there were violations of its regulations.

“Enquiry is under various provisions of (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, (Prohibition of Insider Trading) Regulations, 2015, SEBI (Foreign Portfolio Investors) Regulations, 2019, Offshore Derivative Instruments (ODI) norms,” the note said.

It is also looking at violations, if any, of short-selling norms, the submission said, adding, as the matter was in early stages of examination, it might not be appropriate to list details about the ongoing proceedings at this stage.

On the proposed expert panel, Solicitor General (SG) Tushar Mehta, who is appearing on behalf of the Centre, said Sebi and other regulatory agencies were fully equipped, not only regime-wise but also otherwise, to take care of the situation.

Hence, the has no objection to the constitution of a committee as suggested by the apex court, he added.

The government has agreed to give the court, in a sealed envelope, the names of domain experts for the proposed committee. Explaining the market fall, Sebi said the US entity was a short-seller that did research on it thought had governance and/or financial issues.

The fine print

  • Sebi’s submissions
  • Enquiring into market activity immediately ‘preceding and after the publication of Hindenburg report’
  • Enquiry under various provisions of Sebi regulations
  • Also looking at violations of any short-selling norms

What said

  • Sebi fully equipped to deal with ‘such situations’
  • Don’t want to undermine the expertise of the regulator
  • Remit of proposed committee will have an effect internationally

Its strategy is to take a short position in bonds/shares of such at prevailing prices. It further said if the markets believed the reports, the prices of the bonds/shares started falling.

“Once the fall starts, other institutions who have ‘stop loss limits’ also start selling their holdings of bonds/shares irrespective of whether they believe the report or not, thus triggering a downward spiral in the bond/share prices,” the note added.

The regulator also said in respect of the group under discussion, it had several listed companies in India other than the two recent acquisitions. During the time when there was a significant rise in share prices of the companies of the group, Sebi’s ASM (additional surveillance measure) framework, which is designed to control excessive volatility in stocks (both price increase and price decrease), was triggered on numerous occasions, for long periods of time, and they acted and served as advice to investors in terms of the higher level of risk related to the higher level of volatility in those shares.

Hindenburg in its report has stated the group’s short positions were in dollar bonds in overseas markets and non-Indian traded derivatives. shares continued to struggle on Monday following a report of cutting down capex and the growth trajectory.

The market regulator said in the context of the two petitions filed before the court, the guardrails it had put in place were automatically triggered when ASM became repeatedly applicable to the shares in the group, both when the prices were going up and recently when prices started falling.

The court is hearing the petitions filed by advocates M L Sharma and Vishal Tiwari. Sharma’s plea seeks the prosecution of Nathan Anderson of Hindenburg Research and his associates in India and the US for allegedly exploiting investors and the “artificial crashing” of the Adani group’s stocks.

Tiwari’s plea sought the court’s direction to set up a special committee to oversee a policy for sanctioning loans of more than Rs 500 crore given to big corporations.

RECENT NEWS

JPMorgan Deploys AI Chatbot To Revolutionize Research And Productivity

JPMorgan has deployed an AI-based research analyst chatbot to enhance productivity among its workforce, with approximate... Read more

Private Equity And Banks: The Complex Web Of Leverage

Private equity has emerged as a significant force in the global financial landscape, driving substantial growth and inve... Read more

Financial Watchdog Highlights Unresolved Vulnerabilities In Shadow Banking Sector

The world’s leading financial stability watchdog has issued a warning about the unresolved vulnerabilities within the ... Read more

JPMorgan And Small Caps Lead Market Rally: A Sign Of Economic Optimism

In a week marked by strong financial performance, JPMorgan Chase & Co. reported a 25% rise in profits, and US small-... Read more

Big Banks Vs. Regional Banks: The Battle For Market Share

The financial industry is a competitive landscape where big banks and regional banks vie for market share. Each type of ... Read more

The Evolution Of Philanthropic Advisory Services In Private Banks

The landscape of philanthropic advisory services provided by private banks has undergone a significant transformation. T... Read more