Sebi Clarifies Rule Changes, Promises Action Against Violations

Introduction: The Securities and Exchange Board of India (Sebi) has provided clarification regarding its 2019 rule changes, emphasizing that the amendments do not impede the identification of beneficiaries of offshore funds. Sebi has assured that it will take appropriate action if any violations are found. The regulatory body has continuously strengthened rules related to beneficial ownership and related-party transactions, which are crucial aspects in the allegations of stock price manipulation against the Adani Group. Sebi's response counters certain findings and recommendations made by an expert committee appointed by the Supreme Court.

Sebi: Strengthening regulations and promising action against violations in the capital markets.

Sebi Disputes Expert Committee Findings: 

In response to the expert committee's interim report, Sebi firmly disagrees with the committee's assertion that there is no evident pattern of manipulation in Gautam Adani's companies and that there has been no regulatory failure. However, Sebi concurs with the committee's observation that several amendments made by Sebi between 2014 and 2019 may have constrained regulators' ability to investigate alleged violations involving offshore entities. Sebi, in its recent affidavit submitted to the Supreme Court, challenges the committee's views on the difficulties of identifying economic interest holders behind offshore funds and the potential repricing of stocks. Sebi affirms that the repricing of stocks does not hinder its examination of securities law violations.

Sebi's Stance on Investigation and Recommendations: 

Sebi, while not disclosing the status of its own investigation into the allegations against the Adani Group, maintains its disagreement with the expert committee's findings. Sebi asserts its commitment to taking action if any violations are established. Additionally, Sebi opposes the committee's recommendation to embed a specific timeline for completing investigations, citing concerns that rigid timelines may compromise the quality of the investigation, impose unnecessary constraints, and lead to increased litigation. Sebi argues that investigation timelines should be flexible, as the nature, scope, and complexity of cases in the securities market vary.

Conclusion: Sebi, the capital markets regulator, clarifies that its 2019 rule changes actually enhance the disclosure requirements related to beneficial ownership. In response to the expert committee's interim report, Sebi disputes certain observations and reaffirms its commitment to investigating securities law violations. The Supreme Court, headed by Chief Justice D Y Chandrachud, will review Sebi's affidavit during the ongoing Adani-Hindenburg case.