Spotlight on Sebi’s conduct

A special court ordering registration of FIRs against Madhabi Puri Buch, who just completed her tenure as the chairperson of the Securities and Exchange Board of India (Sebi) and five others, in connection to allegations of financial fraud, regulatory violations and corruption puts the market regulator under the spotlight again. The Anti-Corruption Bureau (ACB) court said there was “prima facie evidence of regulatory lapses and collusion”, which required “a fair and impartial probe”. Sebi was quick to dismiss the allegations and has challenged the court order in the Bombay high court.

The facts in this matter are yet to become clear, and a probe would certainly help demolish or substantiate the allegations. Given that Buch was under fire earlier too for alleged irregularities and conflicts of interest, a certain amount of heat will come the regulator’s way too for rushing to take the litigation route instead of standing by and allowing an investigation to establish the truth.

As a statutory body charged with the regulation of a key segment of India’s financial sector, the market regulator should not give the impression that it is keen on protecting its officials — past and present. Sebi could instead have allowed a probe to clear the names of Buch and others, whom it deems innocent of the allegations made against them. Regulators must be seen as institutions whose integrity is incontrovertible, even if individuals, including those at their helm, face motivated or genuine questions regarding their functioning. That alone can inspire trust among all stakeholders in the space they regulate, in a highly politicised context as India’s, where regulators are often accused of succumbing to pressures from one ruling dispensation or the other.

By leaving room for doubt, regulators carve the path for judicial intervention. This undermines their authority, creating a parallel, quasi-appellate system via the courts. Sebi is all too familiar with this, having had to respond to several instances of litigation in recent years in the Supreme Court; an expert committee foisted on the regulator by the court last year, in relation to Hindenburg-Adani related petitions, underlines this forcefully. Sebi doesn’t just need to be above board; it needs to be seen as that.

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