Buch misses chance to clear air

Her no-show at PAC hearing fuels fresh opposition fire against the government

The troubles don’t seem to end for the Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch. On October 24, Buch and other SEBI officials kept away from a hearing by the Parliament’s Public Accounts Committee, citing “personal reasons”.

The committee was set to conduct a review of regulatory bodies established by Parliament. Buch is facing allegations of conflict of interest raised by US short-seller Hindenburg that link some of her business activities to the Adani Group while she was either member of SEBI or its head.

After informing the panel about the absence of Buch and other officials, chairman and Congress MP K C Venugopal announced the postponement of the morning session of the multi-party panel’s meeting, setting off objections from the ruling NDA members. Later, they conveyed their objections to Lok Sabha Speaker Om Birla. The NDA members argued that no official from a regulatory body can be called without a reference by the Comptroller and Auditor General (CAG), since the PAC’s mandate is around the findings of the CAG. They also sought a vote on selecting topics for the hearings.

Buch’s no-show renewed the opposition’s offensive against the Modi government over the Adani Group. “Why is Madhabi Buch reluctant to answer questions before the PAC of Parliament? Who is behind the plan to protect her from being answerable to the PAC?” Rahul Gandhi, Leader of Opposition, wrote on X on the same day. Hindenburg had also levelled allegations against Prime Minister Narendra Modi over “protecting” Adani.

Hindenburg’s lengthy allegations against Buch – the first woman, and first from the private sector to head the securities markets regulator – are more insinuations than hard evidence. In fact, a case can be made that the short-seller had much stronger allegations against the Adani Group. Earlier this year, Buch and her husband Dhaval denied any wrongdoing in light of the Hindenburg allegations and said they had invested in a fund promoted by IIFL Wealth Management as Singapore-based private citizens, two years before Buch joined as a whole-time SEBI member in 2017.

In a separate statement on the same day, SEBI said Buch made relevant disclosures from time to time and recused herself in matters involving potential conflicts of interest. It also asked investors to “remain calm and exercise due diligence” before reacting to reports like the one published by Hindenburg. Hindenburg Research had linked allegations on SEBI's unwillingness to act against the Adani Group to Buc h’s stakes in offshore funds linked to the conglomerate. It alleged that the Buchs had invested in one of the funds being used by Vinod Adani. It also flagged Dhaval's association with private equity major Blackstone, a promoter of multiple real estate investment trusts (REITs), and SEBI's continued pitch for investors to invest in them.

DH had reported, exclusively, that Buch was unlikely to be given an extension when her current three-year tenure ends on February 28, 2025. This, in itself, is a change considering that her two immediate predecessors – Ajay Tyagi and U K Sinha – got multi-year extensions. Later, other media outlets reported that the Finance Ministry is expected to begin the search for her replacement soon.

A question of credibility

While the central government and the Union Finance Ministry believe that the allegations against Buch are weak, the leadership is aware that extending her tenure will give more ammunition to a much stronger opposition and critics of the government.

Highly-placed sources in the central government have told DH that they don’t find much merit in Hindenburg’s allegations. However, some in the Finance Ministry are of the view that Buch should have been more careful with her investments once she became a member of SEBI and subsequently, its chairperson.  Additionally, a number of SEBI employees have complained to the Finance Ministry about what they allege to be a toxic work environment. The government is worried about the hit SEBI’s reputation has taken at a time when attracting more FII investments to the booming domestic securities market is critical.

For the centre, and Buch, the hearing last week presented a great opportunity. By appearing in front of the PAC, Buch could have cleared the air on multiple issues. It is imperative for India’s market  regulators to be answerable to the people’s representatives. A  transparent, heads-on approach was in order. In any case, hearings of Parliamentary panels are not televised. Facing the PAC would have lent some credence to her clarifications and more importantly, helped salvage some of the regulatory body’s reputation.