- Advertisment -
HomeNationalThe deafening silence on the Adani saga and market watchdog SEBI MIGMG...

The deafening silence on the Adani saga and market watchdog SEBI MIGMG News

- Advertisment -

Migmg news

Securities regulator SEBI appears to be more inclined to protect perpetrators than to punish them,” concludes Hindenburg Research’s damning report on the “stock manipulation scam” and the role of shell companies in inflating the value of Adani shares at the market.

Two and a half months after the report first came out on January 24, 2023, SEBI (Securities and Development Board of India) has yet to break its silence, forcing former RBI governor Raghuram Rajan to question why the regulator is finding it so difficult to he did his job. Surely, if New York-based Hindenburg Research, a small firm with a handful of employees, could uncover details that have remained undisputed to date, further research should surely have been easy for the Indian body set up for just such a purpose. In an interview with the Press Trust of India, Rajan asked, “Does SEBI need help from investigative agencies?”

Why has SEBI failed to solve the apparent mystery of Mauritius-based funds holding and trading Adani shares almost exclusively? Indian journalists and parliamentarians have also asked why SEBI could not see the alleged violations of its guidelines by the Adani Group to reserve 25 percent of the shares of listed companies to the public; Adani Group companies have reportedly earmarked only 2-3 percent for the public.

The Hindenburg report – which drew attention to these opaque companies, the dubious transactions between them and listed companies of the Adani Group, the huge investments made by a bunch of opaque foreign portfolio investment companies based in tax havens and the Group’s huge debt – caused a bloodbath in the Indian stock market. at the beginning of February.

The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, in Chapter 1, (C) reads: “…’fraud’ includes any act, expression, omission, or concealment made whether or not fraudulently . . . for the purpose of inducing another person or his agent to trade in securities . . . ”

(C)(9) elaborates: “The act of an issuer of securities providing misinformation that affects the market price of the security, resulting in the effective misleading of investors . . . .”

SEBI guidelines mandate that foreign portfolio investors (FPIs) must submit the names of ultimate beneficial owners (UBOs) and names of senior management officers to the regulator. But a list submitted by SEBI and shared by the junior finance minister shows that several FPIs with their major investments concentrated in Adani group companies used proxies to hide the identity of UBOs.

On 19 July 2021, Union Finance Minister Pankaj Chaudhary responded to a question from Trinamool Congress MP Mahua Moitra, a former investment banker-turned-politician, about opaque tax haven-based FPIs. She asked about UBOs of FPIs invested in the Adani Group. She wondered whether these FPIs, the Adani Group companies and, more specifically, the Monterosa Group and people associated with it (Alastair Guggenbeel-Ewen, Michael Eric Widmer, Martin de Quervain, Florian Liner) were facing any investigation by Indian enforcement agencies. of the law.

In his reply, the minister said that SEBI and the Directorate of Revenue and Intelligence (DRI) are investigating some FPIs who appear to have invested only in the Adani Group. It also mentioned that disclosure of the details of the investigation by the Income Tax Department is prohibited under the Income Tax Act, 1961, and that the Enforcement Directorate (ED) is not investigating the allegations. The minister’s reply contained an annexure provided by SEBI, which consists of 84 pages and mentions the names of FPIs that have invested in the six listed companies of the Adani Group (Adani Total Gas, Adani Power, Adani Ports and Special Economic Zone, Adani Enterprises, Adani Green Energy and Adani Transmission) and their ultimate beneficial owners or, if the name of the UBO was not identified, the Fund’s Senior Management Officer.

“Beneficial Owners (BOs) are natural persons who ultimately own or control the FPI and should be identified in accordance with Rule 9 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005…” said the operational guidelines of SEBI for foreign portfolio. Investors (FPIs), Designated Depository Participants (DDPs) and Eligible Foreign Investors (EFIs).

The operational guidelines also mention that “in case of companies/trusts represented by service providers like lawyers/accountants, FPIs should provide information about the beneficial owners/effective controllers of those companies/trusts. If the CA exercises controls through means such as voting rights, contracts, arrangements, etc., this should also be specified. It is clarified that the BO should not be nominated to another person and a real BO should be identified.”

Does SEBI follow its own guidelines when it comes to FPIs? Did SEBI adhere to its own regulations in the Adani Group case? The actions of the regulator show that they either did not care or allowed the FPIs “focused only on the Adani Group” to have a free hand and do as they please.

Independent investigations have revealed that the people mentioned in SEBI’s list are not UBOs or actual fund managers of these FPIs. They were all proxies appointed by middlemen who helped anonymous investors hide their wealth through opaque companies and funds. Many of them were found to be linked to opaque funds from notorious tax havens known for money laundering and tax evasion.

It is unbelievable that SEBI was not aware of these facts. In July 2021, the Finance Ministry effectively stated in Parliament that SEBI is already investigating the matter related to these FPIs and DRI is conducting another investigation related to certain transactions of the Adani Group.

A SEBI source claimed to this reporter that the regulator’s investigations have hit a dead end due to jurisdictional issues as all these funds are domiciled in Mauritius or some other tax havens. Those tax havens refused to share the details or did not respond to SEBI, the source claimed.

If this is true, has SEBI informed the Union Ministries of Finance and Corporate Affairs about it? What happened to the DRI investigation? Why didn’t the government speed up the investigation earlier?

It was reported that in May 2022, SEBI sought clarifications from the Adani Group on 17 offshore entities involved in the acquisition of Ambuja Cement by the Group and ACC by Holcim. By all accounts, the regulator is still examining the clarification provided by the Group. What is taking SEBI so long to examine the clarification? What is the outcome of the trial?

The Hindu Businessline reported that Gautam Adani visited SEBI headquarters twice in four weeks in September and October 2022 and met officials, executives and SEBI Chairman Madhabi Puri Bukh. If SEBI was already investigating the issues raised against the Adani Group, its offshore entities and transactions and the FPIs who had parked huge sums of money in the group, was it appropriate for the SEBI chairman and directors to meet Gautam Adani? What was discussed at these meetings? Does the government know too?

These questions are unlikely to be answered by SEBI or the government, which is why a Joint Parliamentary Committee (JPC) inquiry into the various allegations against the Adani Group seems necessary.

However, a lawyer representing the Adani Group recently told NDTV – a news channel now owned by Gautam Adani – that the pressure on the government to set up the MOC is an attempt to tarnish the image of the Modi government (and the Prime Minister). .


- Advertisment -

Most Popular