Below is the full statement from Sebi.
SEBI has taken note of a report published by Hindenburg Research on August 10, 2024.
Investors should remain calm and exercise due caution before reacting to such reports and should also take note of the disclaimer within the report, which states that readers should assume that Hindenburg Research may have short positions in the securities discussed in the report.
The report inter alia alleges that SEBI has not taken any action against the Adani Group. The report questions SEBI’s action in issuing a show cause notice to Hindenburg Research on June 27, 2024. It further alleges that SEBI has made changes in the SEBI (REITs) Regulations, 2014 to benefit diversified multinational financial conglomerates.
These matters require appropriate response. In particular, the allegations made by Hindenburg Research against Adani Group are being duly investigated by SEBI. The Supreme Court in its order dated January 3, 2024, stated that SEBI has completed 22 out of 24 investigations against Adani Group. Subsequently, one more investigation was completed in March 2024 and the remaining one is nearing completion. During the ongoing investigation in the matter, over 100 summonses and around 1,100 letters and emails have been issued seeking information. Further, over 100 communications have been made seeking assistance from domestic and international regulators and external agencies. Also, over 300 documents amounting to around 12,000 pages have been inspected. It may be noted that upon completion of the investigation, SEBI will initiate enforcement proceedings of a quasi-judicial nature. This may include issuance of show cause notice and grant of opportunity of hearing and ultimately passing of a speaking order. Such orders will then be made public. In case of completion of investigations, enforcement proceedings initiated are continuing and appropriate action is being taken in accordance with applicable securities laws.SEBI, as a policy, does not comment on investigations/ongoing enforcement matters.
The report also questions SEBI’s action in issuing a show cause notice to Hindenburg Research on June 27, 2024. The show cause notice in the matter alleging violations of securities laws by Hindenburg Research was issued in accordance with due process of law. It is noted that Hindenburg Research has made available the show cause notice issued against the company on its website. The show cause notice sets out the reasons for its issuance. The proceedings in the matter are ongoing and are being disposed of as per laid down procedure and in accordance with the principles of natural justice.
The report also states that the implementation of SEBI (REITs) Regulations 2014 and changes in regulations have significantly benefited large multinational financial conglomerates. In this regard, it is noted that the SEBI (REITs) Regulations 2014 are being amended from time to time.
As in all cases involving the introduction of new regulations or amendments to existing regulations, a robust consultation process is in place to seek views and feedback from the industry, investors, intermediaries, relevant advisory committees and the general public. Only after consultation, any proposal for introduction of new regulations or changes in existing regulations are placed for consideration and deliberation by the SEBI Board. Regulations are notified after approval by the SEBI Board. As a measure of transparency, agenda papers for Board meetings and outcomes of Board discussions are also published on the SEBI website. Therefore, any allegation that such regulations, regulatory changes or circulars issued in relation to REITs are aimed at favouring one large multinational financial conglomerate is inappropriate.
For the development of the Indian securities market, SEBI has at various times highlighted the potential of asset classes like REITs, SM REITs, InvITs, Municipal Bonds etc. for market democratisation, financialisation of household savings and capital formation through capital markets. These have also been highlighted in the Chairman’s Statement in the latest SEBI Annual Report (see paragraphs titled ‘Financial Inclusion and Democratisation of Markets’ and ‘New Avenues of Capital Formation’). Hence, it is inappropriate to claim that SEBI has promoted REITs and SM REITs among other asset classes only to benefit one large multinational financial conglomerate.
Finally, it is important to highlight that SEBI has appropriate internal mechanisms in place to address issues relating to conflicts of interest, including disclosure frameworks and recusal provisions. It is noted that the relevant disclosures required with respect to security holdings and transfers have been made by the Chairman from time to time. The Chairman has also recused himself with respect to issues of possible conflict of interest.
Over the years, SEBI has built a robust regulatory framework that not only adheres to the highest standards of global practices but also ensures investor protection.
SEBI remains committed to ensuring the integrity and orderly growth and development of India’s capital markets.
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