Hindenburg's Conflict Of Interest Allegations Against Sebi Chief A Bit Too Stretched: Senior Lawyer Argues

Questions have been raised on whether Sebi Chief Madhabi Puri Buch should have recused herself from cases where she or her husband had a direct or indirect stake? Senior Advocate and Former Advocate General of Sikkim Vivek Kohli explains.

New Delhi: Levelling fresh allegations against Sebi Chief Madhabi Puri Buch, US based short seller Hindenburg yet again trained guns at her again, asking if proper disclosures were made or not. 

Hindenburg threw down the gauntlet, asking if the Sebi chief will publicly release the full list of consulting clients and details of the engagements, stating Madhabi Buch’s response to its report includes several important admissions and raises numerous new critical questions. 

Hindenburg further goes on to allege that the fact that Madhabi Buch remained personally invested in the same funds by the sponsor she was tasked with investing, is a 'massive conflict of interest'.

Questions have also been raised whether the Sebi Chief has recused herself in matters involving potential conflicts of interest?

Senior Advocate and Former Advocate General of Sikkim Vivek Kohli in a candid Q&A with Reema Sharma of Zee Media said, two aspects, amongst various other factors, require specific attention while considering a “conflict of interest” situation. The first is how current is the interest and the second is how proximate is the interest. Thus, while the first concerns the time axis, so to say, the second concerns the relationship axis.

Viewing the present controversy from either aspect would reveal that the allegations appear to be stretched, if not – as one would say – a long shot, said Kohli.

"In so far as the time axis is concerned, it appears from the information available that the alleged investments made by the Buchs in a fund based out of Mauritius pre-dated one of them taking up a public assignment. Further, even prior to taking the public assignment, in March of 2017 they withdrew Mrs. Buch’s name from the investment and subsequently, post taking up the assignment, decided to terminate the investment and redeem the investment. This appears to have occurred in 2018. Any alleged relationship ended in 2018. Much prior to the alleged market play, if any. Thus, on this count, the alleged “conflict of interest” allegation seems to be a little dated and stretched," Kohli explained.

Coming to the second issue, the “relationship axis”. The reason for them to invest, in the particular fund they chose to invest in, also appears to be a logical one – where the Chief Investment Officer was a long standing friend and someone who enjoyed their confidence. 

Kohli says, one of the key drivers in a financial investment is the confidence that the person managing the affairs of the investee inspires. It was not a random without cause investment. Further, the same person (CIO) has already stated, unequivocally, that no investment from this particular Fund (IPE Plus) was made in any Adani instruments of any nature. Thus, there was no direct or proximate relationship between the alleged investment made by the Buchs and any Adani entity. On this count too, the alleged “conflict of interest” allegation seems to be a little stretched.

"The entire basis of the allegations, that in some other fund managed by the concerned Financial Institution there is the possibility of some unexplained movement of funds, is remote from both, the time and relationship aspect as far as the Buchs are concerned."

Meanwhile, Hindenburg in its tweet series asked if the Sebi chief will publicly release the full list of consulting clients and commit to a transparent or public investigation into these issues.

"Given this, will she publicly release the full list of consulting clients and details of the engagements, both through the offshore Singaporean consulting firm, the Indian consulting firm and any other entity she or her husband may have an interest in? Finally, will the SEBI Chairperson commit to a full, transparent and public investigation into these issues?," it added.

Advocate Vivek Kohli  has termed the report as Possibly the figment of a very active imagination and unworthy of the attention and time.