Here is the full text of Sebi’s statement:
SEBI noted the report published by Hindenburg Research on August 10, 2024.
Investors should remain calm and do their due diligence before reacting to the report. Investors also like to note a disclaimer in the report stating that readers should assume that Hindenburg Research may have short positions in the securities covered in the report.
The report inter alia states that SEBI has not taken any action against the Adani Group. It is a question of the actions of SEBI which published a show cause notice to Hindenburg Research on June 27, 2024. It further claims that SEBI has changed the SEBI (REIT) Regulations 2014, for the benefit of various multinational financial conglomerates.
These issues warrant an appropriate response. Notably, the allegations made by Hindenburg Research, against the Adani Group, have been duly investigated by SEBI.The Hon’ble Supreme Court in its Order of January 3, 2024, noted that SEBI has completed twenty-two out of twenty-four investigations into the Adani group. Subsequently, one more investigation has been completed in March 2024, and one investigation is nearing completion. During the investigation of this matter, more than 100 subpoenas, about 1,100 letters and emails have been issued in search of information. Furthermore, more than 100 communications have been made requesting assistance from domestic/foreign regulators and external agencies. Also more than 300 documents containing around 12,000 pages have been examined. It may be noted that upon completion of the investigation, SEBI initiated enforcement proceedings which are quasi-judicial in nature. This includes publishing a show cause notice and giving an opportunity to be heard which culminates in the passing of the speaking order. The order is then made available in the public domain. Once the investigation is complete, the enforcement process initiated is conducted and appropriate action is taken under applicable securities laws. SEBI, as a matter of policy, does not comment on ongoing investigations/enforcement matters.
The report also questioned the conduct of SEBI in issuing a show cause notice to Hindenburg Research on June 27, 2024. The show cause notice in question, alleging violation of securities laws by Hindenburg Research, had been issued following due process of law. It is noted that Hindenburg Research has made the issued event notice available on its website. The show cause notice contains the reasons for being issued. The proceedings in this matter are ongoing and they are being conducted in accordance with established procedures and in accordance with the principles of natural justice.
The report also stated that the implementation of the SEBI (REIT) Regulations 2014 as well as changes in the regulations have resulted in significant benefits for large multinational financial conglomerates. In this regard, it may be noted that the SEBI (REIT) Regulations, 2014 have been amended over time.
As in all cases involving the introduction of new regulations or amendments to existing regulations, a robust consultation process seeks input and feedback from industry, investors, intermediaries, relevant Advisory Committees and the general public. Only after consultation, proposals for the introduction of new regulations or changes in existing regulations are placed for the consideration and deliberation of the SEBI Board. Regulations are notified after the approval of the SEBI Board. As a measure of transparency, agenda papers for Board meetings and the results of Board discussions are also published on SEBI’s website. Therefore, the contention that these regulations, regulatory changes or circulars issued related to REITs in favor of large multinational financial conglomerates, is not relevant.
For the development of the Indian securities market, SEBI has at various times emphasized the potential of REITs, SM REITs, Invitations and Municipal Bonds among other asset classes for the democratization of the market, the financialization of household savings and for the formation of capital through the capital market. This was also highlighted in the latest SEBI Annual Report, as part of the Chairman’s Statement (see paragraphs titled ‘Financial Inclusion and Democratization of Markets’ and ‘New Paths to Capital Formation’). Therefore, the contention that the promotion of REITs and SM REITs among various other asset classes by SEBI is only for the benefit of large multinational financial conglomerates, is inappropriate.
Finally, it is emphasized that SEBI has adequate internal mechanisms to deal with issues related to conflicts of interest, which include a disclosure framework and a provision for withdrawal. Please note that the relevant disclosures required in respect of securities ownership and transfer have been made by the Chairman from time to time. The chairman has also recused himself in matters involving potential conflicts of interest.
SEBI, over the years, has put in place a robust regulatory framework that is not only in line with global best practices but also ensures the protection of investors.
SEBI remains committed to ensuring the integrity of the Indian Capital market and its orderly growth and development.
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