Adani-Hindenburg PILs: Existing Framework Is Robust, SEBI Says

The Securities and Exchange Board of India has submitted a note in compliance with the directions of the apex court in the Adani-Hindenburg matter. The note seeks to show that the existing regulatory regime is solidly built to ensure continued growth and development of the securities markets, while also safeguarding investor interests.

This comes in the backdrop of CJI DY Chandrachud's concerns regarding protection of investors' money and whether the existing regulatory mechanism is robust enough to deal with the rout Adani stocks witnessed.

To that, the regulator said it's already enquiring into both, the allegations made in the Hindenburg report as well as the market activity immediately preceding and post the publication of the report. The investigation is to determine any violation of regulations relating to unfair trade practices, insider trading, foreign portfolio investors, offshore derivative instruments and short selling.

"As the matter is in early stages of examination, it may not be appropriate to list details about the ongoing proceedings at this stage."

SEBI goes on to say since short selling is considered a legitimate investment activity by a majority of the developed economies, it is legal in India as well. However, this is also a regulated activity and SEBI has in place regulatory frameworks for its governance.

The regulator's additional surveillance mechanisms, which are meant to manage excessive volatility in stocks, were activated on many occasions, for extended periods of time, during the period when share prices of companies within the Adani Group rose significantly, advising investors about a higher degree of risk associated to the higher level of volatility in those shares, the note said.

It emphasized that Indian markets are very resilient and this is an isolated incident concerning a single group of companies, which has no significant impact at a market-wide level or at a system-wide level that might warrant a review of the existing framework.

Lastly, the market regulator noted that addressing such out-of-the-ordinary occurrences on a company/group level is a question of monitoring and enforcement action, and if necessary, such steps can be taken by the authorities under the existing framework.

Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.