Last Wednesday, the Supreme Court granted more time to the Securities and Exchange Board of India (SEBI) to complete its probe into Hindenburg Research’s allegations of wrongdoing, stock price manipulation and violation of minimum public shareholding requirements by Adani group firms. Allegations included. Beyond the court’s original May 2 deadline, Sebi had sought at least six more months, citing complexities and the need to unearth layered deals deemed “suspicious”. The market watchdog has now got a respite of three months. But the findings of a court-appointed six-member expert panel to review the overall regulatory and investor protection framework of the Indian securities market in the wake of volatility in Adani Group’s share prices, do not inspire much hope for a speedy conclusion. In its most significant context – regulatory failure to deal with alleged violations of securities market laws in relation to the Adani Group or other companies – the committee’s findings are not emphatic.
For example, on the question of stock price manipulation, SEBI told a Justice AM Sapre-led panel that 849 automated “alerts” were issued by stock exchanges in 57 months till December 2022, resulting in four reports. The first of these reports in September 2020 drew SEBI’s attention to some foreign general portfolio investors (FPIs) holding Adani Group shares. Contrasting this with earlier complaints, SEBI launched a formal probe in October 2020 into the possible violation of the 25% public shareholding norm. Sebi referred the trading data of Adani Enterprises to the panel and said no manipulation was found. But such analysis was still underway for other group stocks, forcing the panel to conclude that “… prima facie”, it would not be possible to say that there has been a “regulatory failure”, Even this kind of investigation should be timely. -bound. Even on its investigation of public shareholding and related party transactions flagged by Hindenburg, the panel’s conclusion is carefully worded and indicates its own lack of timing. “In these circumstances, it will not be possible to roll back a finding of regulatory failure … there really needs to be a coherent enforcement policy.” The main reason Sebi has come up blank in its efforts (which began in 2020 and revived after the Hindenburg report) to identify 42 ultimate beneficiaries behind 13 FPIs with large stakes in Adani group firms is that the regulator itself in 2019 FPI norms were changed. To make this illusion possible. Such a self-inflicted ‘chicken and egg’ situation, with whimsical legislation aside from enforcement, is rare and calls for a closer look at SEBI’s approach to its core mandate of protecting investors.