The Supreme Court of India has questioned the Securities and Exchange Board of India (SEBI), the country’s capital markets regulator, regarding the measures taken to address short-selling and protect small investors. This inquiry comes in the wake of the stock market turmoil caused by the release of a report by US-based short-seller Hindenburg Research in January of this year.
The Supreme Court expressed concerns about the market volatility and losses suffered by investors and asked SEBI to investigate the matter. SEBI informed the court that it would not request an extension to complete its probe into the allegations made by Hindenburg against the Adani Group.
The court further questioned SEBI about any wrongdoing on the part of short-sellers. In response, Solicitor General of India Tushar Mehta stated that the government was taking action against short-selling wherever it was found. He also mentioned that suggestions from an expert committee on strengthening the regulatory framework were being considered.
The Supreme Court also raised tough questions about a demand by senior lawyer Prashant Bhushan for action against SEBI for not meeting the court’s deadline and for an investigation into allegations made by the George Soros-funded Organised Crime and Corruption Reporting Project (OCCRP) against the Adani Group. SEBI dismissed the OCCRP report as unreliable, coming from a “foreign non-profit (NGO)”.
Tushar Mehta raised concerns about a conflict of interest, stating that when details were sought from OCCRP, they directed the queries to an NGO linked to Prashant Bhushan. Mr. Bhushan cited reports in foreign media and questioned why SEBI was not investigating the allegations.
The Chief Justice of India, DY Chandrachud, emphasized that SEBI should rely on evidentiary value and cannot base its investigations solely on newspaper stories. The court had previously directed SEBI to investigate any violations related to the Hindenburg report on the Adani Group within two months. SEBI requested a six-month extension, but the court granted three months for the submission of a status report.
The Supreme Court had also appointed a committee of domain experts to review India’s regulatory mechanism for investor protection. In their report, the committee stated that there was no price manipulation by the Adani Group and that the conglomerate had taken steps to reassure retail investors. The committee also confirmed that foreign portfolio investors in Adani Group stocks were compliant with SEBI’s regulations.
Overall, the Supreme Court has sought clarification from SEBI regarding its actions to address short-selling and protect small investors. It has also raised questions about the investigation into allegations against the Adani Group and emphasized the need for reliance on credible evidence in regulatory proceedings.
