SEBI Chief Faces Scrutiny Over Alleged Conflict of Interest

Madhabi Puri Buch, the head of India's Securities and Exchange Board (SEBI), is facing allegations of potential rule violations and conflict of interest. These claims have sparked a debate on regulatory integrity in one of the world's largest emerging markets.

According to public documents reviewed by Reuters, Buch continued to earn revenue from a consultancy firm during her seven-year tenure at SEBI, potentially breaching rules for regulatory officials. This revelation comes amidst an ongoing investigation into the Adani Group, triggered by allegations from Hindenburg Research in January 2023.

The documents show that Agora Advisory Pvt Ltd, in which Buch holds a 99% stake, earned 37.1 million rupees ($442,025) in revenue during her time at SEBI. This arrangement potentially violates a 2008 SEBI policy prohibiting officials from holding an office of profit or receiving professional fees from other activities.

Buch, who joined SEBI in 2017 and was appointed to the top position in March 2022, has denied the allegations. In a statement on August 11, 2024, she termed the claims as an attempt at "character assassination" and stated that the consultancy firms had been disclosed to SEBI.

The controversy has led to calls for Buch's resignation, including from opposition leaders. However, a spokesperson for the ruling Bharatiya Janata Party (BJP) dismissed the allegations as baseless.

Subhash Chandra Garg, a former top bureaucrat and SEBI board member during Buch's tenure, described her equity in the firm and its continued business operations as a "very serious" breach of conduct. He stated, "There was no justification for her to continue to own the firm after she joined the board. She could not have been allowed even after making disclosures."

"This makes her position completely untenable at the regulator."

The situation has raised questions about the transparency of disclosures within SEBI. According to Garg and another SEBI board member, no disclosures were made to the board regarding officials' business interests. The board member, speaking anonymously, stated that while annual disclosures were required, they were not placed before the board for scrutiny.

As the controversy unfolds, it highlights the challenges of maintaining regulatory integrity in India's rapidly evolving financial markets. SEBI, established in 1992, plays a crucial role in regulating the Indian securities market and has the authority to impose penalties for violations of securities laws.

The outcome of this situation could have significant implications for SEBI's reputation and the broader regulatory landscape in India. As the financial year 2024-2025 approaches, all eyes will be on how this matter is resolved and what changes, if any, are implemented to ensure transparency and adherence to regulatory standards.