Rajya Sabha MP and senior advocate Mahesh Jethmalani on Sunday urged the Sebi to file a serious case against US short-seller Hindenburg Research, which has come out with another report targeting the market regulator's chairperson Madhabi Puri Buch. Hindenburg published a similar report in January last year against Indian conglomerate Adani Group.
Before publishing the report against Adani, the short-seller had taken a short position in Adani stocks. As the stocks tanked following the negative report, Hindenburg made huge profits. The Sebi is probing the role of Hindenburg for violations of securities laws. The regulator issued a show-cause notice to Hindenburg on June 27, 2024.
Today, Jethmalani said that Sebi must probe this much more deeply than they are doing. "Retail investors have lost a lot of money. This is a consorted attempt, to rock the stock market, undermine our budget, and cause reputational damage to Adani."
The lawyer said all those people relying on the Hindenburg report are shallow-brained because there is nothing in that report. "The whole fulcrum of the report is some DRI inquiry. They should file a serious case against Mr Hindenburg and carry out an extradition proceeding in the US."
Jethmalani said Sebi had issued a notice to Hindenburg seeking information regarding the circumstances of the Adani short sale as it was entitled to. Instead of responding to these, he added, Hindenburg has chosen to attack its Chairperson on the grounds of conflict of interest.
"The picture thus is one of a US-based profiteer who made millions of dollars at the cost of Indian retail investors now hedging questions legitimately asked by the Indian regulator and brazenly defaming the latter without answering its questions. This reeks of colonial arrogance of days bygone and contempt by a rich country national fortified by the safe harbour, of the economic sovereignty of an Emerging nation," he said.
In its report, which many industry leaders termed a hit job, Hindenburg alleged that it suspects Sebi's unwillingness to act against Adani may be because Buch had stakes in offshore funds linked to the conglomerate.
The markets regulator in a detailed note said it investigated all the charges against the Adani Group. It also said that relevant disclosures required in terms of holdings of securities and their transfers have been made by Buch. "Chairperson has also recused herself in matters involving potential conflicts of interest," it added.
Sebi also urged investors to remain calm and exercise due diligence before reacting to the report from Hindenburg. "Investors may also like to take note of the disclaimer in the report that states that readers should assume that Hindenburg Research may have short positions in the securities covered in the report," it said.