SEBI Chairperson Madhabi Puri Buch: Conflict of Interest Allegations

Introduction

Hindenburg Research, a U.S.-based firm, has recently leveled serious allegations against the Chairperson of the Securities and Exchange Board of India (SEBI), Madhabi Puri Buch. These allegations revolve around a potential conflict of interest, particularly concerning her previous connections with major companies and her involvement with certain financial entities linked to the Adani Group. The ongoing scrutiny has raised questions about her ability to serve impartially as the head of India’s primary market regulator.

Allegations of Conflict of Interest of SEBI Chairperson Madhabi Puri Buch

Hindenburg Research has accused Madhabi Puri Buch of a conflict of interest, suggesting that her ties to certain companies could compromise her role as SEBI Chairperson. Specifically, the firm has pointed to her past connections with Blackstone, a major American private equity firm with significant investments in India. Blackstone holds stakes in various prominent companies, including Indiabulls Housing Finance,

Aadhar Housing Finance, and Mphasis. Despite Buch’s claims that she has recused herself from matters involving Blackstone, the lack of transparency regarding which companies she has recused herself from has fueled concerns about the effectiveness of these measures. This situation raises the possibility that her previous private sector role could influence her decisions as a regulator, casting doubt on her impartiality.

The Case of Aadhar Housing Finance &  SEBI Chair Person Madhabi Puri Buch

One of the key points of contention is SEBI’s approval of an Initial Public Offering (IPO) for Aadhar Housing Finance, a company controlled by Blackstone, during Buch’s tenure. Critics argue that this approval exemplifies the potential conflict of interest, as Buch’s past connections with Blackstone may have influenced the decision. Additionally, her involvement in resolving an insider trading case against Atul Goel, linked to a company partly owned by Blackstone, further raises concerns about her ability to remain unbiased. The ongoing scrutiny suggests that these connections could hinder her effectiveness as a regulator and erode trust in SEBI’s impartiality.

Ongoing Role at Agora Advisory

Another significant concern involves Madhabi Puri Buch’s continued involvement with Agora Advisory Private Ltd, a consulting firm where she holds 99% of the shares. Despite being a top official at SEBI, Buch has continued to earn revenue from this firm, raising questions about whether she has truly severed her business ties as she claimed. Documents reveal that Buch remained the primary shareholder of Agora Advisory even after joining SEBI in 2017, and the firm has continued to operate, generating revenue and profits as recently as the 2023-24 fiscal year. This ongoing involvement with a private business could be seen as a direct conflict of interest, given SEBI’s 2008 policy prohibiting its officials from earning money from other professional activities while in office.

Hindenburg Research’s New Revelations

The situation became even more complex when Hindenburg Research released new information linking investments made by Madhabi Puri Buch and her husband, Dhaval Buch, to a Mauritius offshore fund used by the Adani Group. These revelations have drawn further attention to her ties with Agora Advisory and raised doubts about her ability to remain impartial in her role as SEBI Chairperson. The offshore fund, in which the Buchs had invested, was allegedly involved in the “Adani money siphoning scandal,” further complicating the situation. Although the Buchs have stated that their investment in the fund occurred while they were living in Singapore as private citizens and was redeemed in 2018, questions remain about whether this investment represents a conflict of interest.

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Clarification by Madhabi Puri Buch

In response to these allegations, Madhabi Puri Buch and her husband have issued a statement explaining their involvement with the offshore fund. They stated that their investment was made almost two years before Buch joined SEBI in 2017 and was influenced by Mr. Buch’s friendship with Anil Ahuja, the fund’s Chief Investment Officer. The Buchs also emphasized that they sold their investment in 2018 when Ahuja left his role and provided confirmation that the fund did not invest in any Adani Group companies. However, despite these explanations, the questions surrounding her impartiality remain unresolved.

Concerns Over Consulting Firms

Hindenburg Research also highlighted Madhabi Puri Buch’s ownership of two consulting firms, one in Singapore and the other in India. The Singapore firm was transferred to her husband in March 2022, but the Buchs have clarified that both firms became inactive when Buch joined SEBI. They also stated that the transfer was properly disclosed to SEBI and Indian tax authorities. However, the fact that these firms were operational while Buch was serving as SEBI Chairperson raises further concerns about potential conflicts of interest. The consulting firm Agora Advisory, along with its auditor Shah & Savla LLP, is registered at the same address, leading experts to question the independence of the auditor and further complicating the situation.

Criticism from Former Officials

Subhash Chandra Garg, a former top Indian government official and SEBI board member, has been particularly critical of Madhabi Puri Buch’s continued ownership of Agora Advisory. He described it as a “very serious” breach of conduct and argued that she should not have been allowed to retain ownership of the firm after joining SEBI, even if she disclosed it. Garg’s criticism underscores the broader concerns about Buch’s ability to effectively manage her role as SEBI Chairperson without conflicts of interest.

Conclusion and Future Implications

The allegations against Madhabi Puri Buch by Hindenburg Research have raised significant concerns about her ability to serve as an impartial regulator. Her past connections with major companies, ongoing involvement with a consulting firm, and investments in an offshore fund linked to the Adani Group have all contributed to doubts about her impartiality. While Buch has provided explanations and clarifications, the lack of transparency and unresolved questions continue to cast a shadow over her role as SEBI Chairperson.

Moving forward, it is crucial for SEBI to address these concerns and ensure that its leadership is free from any potential conflicts of interest to maintain trust in India’s financial markets.

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