MUMBAI: As the Hindenburg research report continues to be discussed across the country, the Securities and Exchange Board of India (Sebi) has urged investors to remain calm and conduct thorough research before reacting.

Mumbai : As the Hindenburg Research Report continues to be discussed across the country, the Securities and Exchange Board of India (SEBI) has urged investors to remain calm and conduct thorough research before reacting to the Hindenburg Research Report.

“Investors should remain calm and conduct due diligence before reacting to such reports. Investors may also like to note the disclaimer in the report which states that readers should assume that Hindenburg Research may have a short position in the securities covered in the report,” SEBI said in a statement. is

SEBI rejects charges against US-based short sellers

SEBI's late-night release refuted the allegations made by the US-based short seller, saying “the allegations made by Hindenburg Research against the Adani Group have been duly investigated by SEBI.”

He adds that the Supreme Court has also mentioned in its order that SEBI has completed investigations in 22 out of 24 cases.

“The Hon'ble Supreme Court in its order dated January 3, 2024 has stated that SEBI has completed twenty-two out of twenty-four investigations into the Adani Group. Subsequently, another investigation was completed in March 2024 and one remaining investigation is nearing completion.

The ongoing investigation in the last case is also about to be completed, a Sebi statement said.

“…In this case, more than 100 summonses, about 1,100 letters and emails have been issued to obtain information. Further, more than 100 communications have been made to seek assistance from domestic/foreign regulators and external agencies. Also, more than 300 documents of about 12,000 pages have been examined.”

SEBI gives reasons to support the argument

Sebi says that as per the rules on completion of investigation, before initiation of enforcement proceedings, a show cause notice is issued and the parties are given an opportunity to be heard.

“Consequent to the completion of the investigation, SEBI initiates enforcement proceedings which are quasi-judicial in nature. This includes issuing show cause notices and giving an opportunity of hearing which results 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 under applicable securities laws.
As a policy measure, SEBI refrains from commenting on any investigation or ongoing enforcement case.

SEBI says the show cause notice issued to Hindenburg Research on June 27, 2024, was issued after due process of law for violation of securities laws.

“It is noted that Hindenburg Research itself has made the show cause notice issued to them available on their website. A show cause notice shall contain the reasons for issuing it. The proceedings in this case are ongoing and are being dealt with in accordance with the established procedure and following the principles of natural justice.

Alleging that SEBI's (REIT) rules benefited large multinational financial conglomerates, SEBI says the REIT rules were amended from time to time and implemented after vigorous stakeholder consultation.

“As in all cases involving new regulations or amendments to existing regulations, a robust consultation process is underway to seek input and feedback from industry, investors, intermediaries, relevant advisory committees and the public at large. Only after consultation, a proposal to enact new regulations or amend existing regulations is placed for the consideration and deliberation of the SEBI Board. Rules are notified after approval by SEBI Board. As a measure of transparency, agenda papers for board meetings and results of board discussions are also published on the SEBI website.

Therefore, the claim that such regulations, or circulars relating to REITs were favorable to a large multinational financial group, is untenable.

The market regulator further adds that for the development of the Indian securities market, SEBI has highlighted the potential of REITs, SM REITs, InvITs and Municipal Bonds among other assets and highlighted in the latest SEBI Annual Report. Therefore, the claim that SEBI's promotion of REITs and SM REITs among various other asset classes was only for the benefit of a large multinational financial conglomerate is untenable.

The release also said that the SEBI Chairperson recused herself in cases related to conflict of norms.
“It has been emphasized that SEBI has adequate internal mechanisms to address issues related to conflict of interest, including disclosure framework and provision for recusal. It is noted that the relevant disclosures required regarding holdings of securities and their transfer have been made by the President from time to time. The President has also recused himself from potential conflicts of interest.”

The market regulator has over the years created a robust regulatory framework that aligns with global best practices and also ensures investor protection. A day after US-based short-seller Hindenburg Research alleged that SEBI chairperson Madhabi Puri Buch and her husband Dhaval Buch in their individual capacities had stakes in “both the murky offshore entities used in the Adani money siphoning scandal”. A detailed statement was issued denying the allegations. This followed a brief statement issued by him on Sunday where he accused Hindenburg of tarnishing his reputation.

Earlier on Saturday, US-based firm Hindenburg Research had alleged that Sebi chairperson Madhabi Buch and her husband have partnerships in “both murky offshore entities used in the Adani money siphoning scandal”.

In January 2023, Hindenburg published a report accusing the Adani Group of financial irregularities, causing the company's share price to drop significantly. At the time, the group denied these claims.

In January 2024, the Supreme Court refused to transfer the probe into the allegations of stock price manipulation by the Adani Group to the SIT and directed market regulator Sebi to complete the probe into the two pending cases within three months. Earlier this year, the SC dismissed a petition seeking a review of the verdict in the Adani-Hindenburg case seeking an inquiry by market watchdog Sebi.

(with input from agencies)