Adani-Hindenburg case: 22 out of 24 probe reports final, SEBI tells SC

The report said 13 investigations are related to Related Party Transactions (RPT)- failure to disclose transactions with related parties and other relevant information. Two investigations are related to the manipulation of stock prices in contravention of existing laws, writes Sumit Saxena.

New Delhi:Markets regulator Securities and Exchange Board of India (SEBI) in a status report informed the Supreme Court that out of its 24 investigations in the Adani-Hindenburg controversy, 22 are final in nature and two are interim.

SEBI said the interim investigation covered 13 overseas entities of Adani's companies and it has sought details from five countries on FPIs and said, "as many of the entities linked to these foreign investors are located in tax haven jurisdictions, establishing the economic interest of shareholders of the 12 FPIs remains a challenge ".

The report said: “It is submitted that out of the said 24 investigations, 22 are final in nature and 2 are interim in nature. As of date, the said 22 final investigation reports and 1 interim investigation report are approved by the competent authority in accordance with SEBI's extant practice and procedures”.

The report said: “In the remaining one matter, interim findings are approved by the competent authority. It is further submitted with respect to the interim investigation reports that SEBI has sought information from external agencies/entities and upon receipt of such information will evaluate the same vis-a-vis the interim investigation report to determine further course of action, if any, in the said matters”.

The report said 13 investigations are related to Related Party Transactions (RPT)- failure to disclose transactions with related parties and other relevant information. Two investigations are related to the manipulation of stock prices in contravention of existing laws.

The interim report said “Investigation covered 13 overseas entities (12 FPIs and 1 Foreign Entity), who were classified as public shareholders of the Adani Group Companies”. “ As many of the entities linked to these foreign investors are located in tax haven jurisdictions, establishing the economic interest shareholders of the 12 FPIs remains a challenge. However, efforts are still being made to gather details from five foreign jurisdictions pertaining to the economic interest shareholders of the FPIs to help SEBI update this report accordingly”, said the report.

Foreign Portfolio Investments (FPIs) are a component of the non-promoters/public shareholders' grouping in listed companies. The report said the scope of investigation also includes “analysis of the trading of FPI/ Foreign Entities named in the Hindenburg Report in the Adani group scrips on the allegation of manipulative wash trades or other forms of manipulative trades by the FPIs/foreign entities mentioned in the Hindenburg Report”.

The report added that the scope of investigation also includes analysis of the allegations made in respect of the delivery-based trades undertaken by the alleged entities in the 3 Adani group scrips namely Adani Transmission Ltd., Adani Enterprises Ltd, and Adani Power Ltd. “Analysis of trading by 3 clusters of FPIS in the aforesaid 7 Adani group scrips, with respect to price-volume manipulation”, it added.

The status report said SEBI shall take appropriate action based on the outcome of the investigations in accordance with the law on the given aspects. The apex court had set August 14 as the deadline for SEBI to complete its investigation and submit the report. The matter is scheduled for a hearing on August 29.

On August 14, the SEBI moved the Supreme Court seeking an extension of 15 days to complete the ongoing probe into the allegations made by US-based short-seller Hindenburg Research against the Adani Group. The market regulator SEBI, in its fresh application, has informed the top court that out of the said 24 investigations/examinations, 17 are complete and approved by the competent authority in accordance with SEBI’s extant practice and procedures.

SEBI sought an extension of 15 days’ time for filing the report on the conclusion of the probe, or any other period as the apex court may deem fit. On July 11, the apex court asked the SEBI about the status of its ongoing investigation into the Hindenburg-Adani controversy. The apex court said the probe has to be concluded expeditiously by August 14.

In an application, filed in the Adani-Hindenburg controversy case, market regulator SEBI has told the Supreme Court that changes made in Foreign Portfolio Investors (FPI) regulations in 2018 and 2019 effectively tightened the disclosure requirement related to beneficial owners (BOs).

In its interim report, the Supreme Court-appointed expert committee had said that it saw no evident pattern of manipulation in Adani’s companies and there was no regulatory failure. However, the committee cited several amendments the SEBI made between 2014-2019 that constrained the regulator’s ability to investigate, and its probe into alleged violations in money flows from offshore entities has drawn a blank.

The Supreme Court-appointed committee -- headed by retired judge AM Sapre probing the Adani-Hindenburg controversy -- had cited the change in rules as one factor, which made it difficult for the Sebi to identify beneficiaries of offshore funds which allegedly invested in the companies of the Adani Group.