Opinion Express View on Adani controversy: SEBI must answer
Regulator needs to address questions that have been raised. This matters for investor confidence too
As per the report, ED had shared its findings with SEBI. 
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Following the rout in the stocks of companies of the Adani Group, after publication of the Hindenburg report, the Securities and Exchange Board of India began to look into the gamut of issues this episode has raised, including allegations against the group, and possible manipulation of stock prices.
Subsequently, the report of the expert committee, appointed by the Supreme Court, broadly outlined the scope and extent of SEBI’s investigation. While the committee concluded that there was no evidence of regulatory failure, several reports over the past week, which provide granular details on issues such as minimum public shareholding and stock market activity, suggest otherwise. These reports point towards gaps in the regulatory architecture, and raise questions that the stock market regulator needs to address urgently.
Last Tuesday, a report in this paper provided details of an investigation carried out by the Enforcement Directorate which concluded that a dozen companies, including foreign investors based in tax havens, were “top beneficiaries” from short selling of companies of the Adani Group.
Some of these investors had, in fact, taken positions just a few days before the release of the Hindenburg Research report. None of these entities, however, are reported to have disclosed tier ownership structures to income tax authorities. As per the report, ED had shared its findings with SEBI.
A few days after that, another report detailed how two individuals — one from the UAE and another from Taiwan — who had taken large positions in the Adani Group companies were associates of Vinod Adani (Gautam Adani’s brother). If these individuals were to be considered as proxies for Vinod Adani, and treated as part of the promoter group, it would imply that the Adani Group companies may have violated stock market rules. Another report in this paper showed that two offshore shell companies registered in the British Virgin Islands that are said to have invested in Adani Group stocks are also linked to the group. The denials issued by the Adani Group have done little to address the concerns.
Questions have also been raised, and rightfully so, about SEBI. If the “legislative policy” of the regulator moves in the opposite direction of its “investigation and enforcement”, it limits its operational space, and curtails its ability to carry forward its responsibilities.
Apprehensions are also stoked when a former SEBI Chairman, to whose tenure some of the allegations made in the reports can be traced, becomes an independent director and non-executive chairperson of a new channel owned by the Adani Group.
As the stock market regulator, whose primary duty is to ensure the integrity of the markets and protect the interests of investors, SEBI would do well to address the questions raised in a comprehensive manner.
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