Allegations against India’s Market Regulator Chief Threaten Credibility

India’s Securities and Exchange Board of India (Sebi) is dealing with a credibility crisis following a surge of allegations against its chairperson, Madhabi Puri Buch. These charges, primarily related to conflicts of interest, have been levied from various sources over the past month, casting a shadow over the regulator’s reputation.

Despite the ongoing bull run in India’s equity markets the controversy surrounding Buch is intensifying. Foreign investors have poured over $6 billion (£4.5 billion) into the Indian market, while a surge of retail investors has joined the mutual fund and IPO excitement.

The controversy erupted in August when US-based short-seller Hindenburg Research accused Buch and her husband of holding investments in an offshore fund associated with the Adani Group. This raised suspicions that Sebi’s investigation into Adani’s alleged accounting fraud and market manipulation was being delayed due to these investments.

The accusations against Buch have expanded since then. The Congress party has alleged that she received rental income from a company under investigation and held an “office of profit” at ICICI Bank. It claims she continued to benefit from Employee Stock Ownership Plans (ESOPs) long after her tenure at the bank had ended.

Adding fuel to the fire, Subhash Chandra Goyal, chairman emeritus of Zee Entertainment Enterprises, has publicly accused Buch of corruption and vindictiveness. Goyal is currently facing regulatory issues and is barred from holding positions in listed firms.

Perhaps most damaging is the internal dissent within Sebi. On September 5, around 1,000 Sebi employees staged an unprecedented protest outside the regulator’s headquarters. They had previously sent a letter to the finance ministry alleging a toxic work environment characterized by “immense pressure” and public humiliation. Sebi has dismissed these claims as “misplaced” and suggested that junior officers might have been influenced by external elements.

Independent business analyst Hemindra Hazari remarks on the gravity of the situation: “Internal problems have become public, adding a new dimension to the crisis. Something is seriously wrong.”

Buch has vehemently denied the allegations related to Hindenburg’s claims and has rejected the conflict of interest accusations. ICICI Bank has stated that she did not receive a salary or ESOPs beyond her retirement benefits. However, Buch has yet to address the protest by Sebi employees or respond to Goyal’s criticisms.

As Sebi continues to face scrutiny, the regulatory body’s response—or lack thereof—will be crucial in determining how it navigates this turbulent period and restores its credibility.