SEBI disagrees with Supreme Court appointed expert panel on Adani dispute
Capital markets regulator Sebi told the Supreme Court on Monday that its 2019 rule change does not make it difficult to identify beneficiaries of offshore funds, and action will be taken if any violations are found. At the same time, SEBI said that it has continuously tightened the rules related to beneficial ownership and related-party transactions.
A Supreme Court-appointed expert committee in May said in an interim report that it did not see “any clear pattern of manipulation” in billionaire Gautam Adani’s companies and there was no regulatory failure.
However, it cited several amendments made to the Securities and Exchange Board of India (SEBI) between 2014 and 2019, which hampered the regulator’s ability to investigate. Its investigation into alleged violations in money flow from offshore entities came up empty.
Without making any mention of the status report of its own probe, Sebi in its latest affidavit in the Supreme Court said it does not agree with the expert committee’s observation of difficulties in identifying economic interest holders behind an offshore fund.
This also differs from the panel’s observation that if the market perceives that the actions the company has taken in the past were not desirable, the stock will re-price. Even though the market may re-price the company’s shares based on past transactions. There is no bar on SEBI to investigate any violation of securities laws as the revaluation of stocks has taken place.
SEBI indicated that it does not agree with the views of the Expert Committee and action will be taken if any violation is found/established. The committee was supposed to work parallel to SEBI’s probe into foreign entities investing in the Adani group. The regulator was first given two months to complete the probe and then three months till August 14.
In the affidavit, Sebi said its 2019 rule changes have actually tightened the disclosure requirement relating to beneficial owners.
In its 43-page filing, Sebi opposed the expert committee’s recommendation that a certain time limit should be included in the law for the regulator to complete its probe, saying setting such limits would affect the quality of the probe. Compromises can happen, barriers can arise and escalation can happen.
A bench headed by Chief Justice DY Chandrachud is scheduled to hear the matter tomorrow. In the affidavit, SEBI has given its views on the recommendations of the expert committee on effective enforcement policy, judicial discipline, strong settlement policy, required timelines, surveillance and market governance measures, creation of financial redressal agency and other issues.
It added that it may not be appropriate to lay down timelines for initiation of inquiry and proceedings as it is mandatory for the Board to form prima facie opinion (reasonable grounds) for appointing the Inquiry Authority.
With this, SEBI said that the nature, scope and complexity of cases in the securities market vary widely and the appropriate time to complete the investigation would depend on the facts of each specific case and the availability of information. Therefore, specific timelines may be prescribed for completion of the investigation. Compromise the quality of the investigation.