Buch leaves behind a battered SEBI

The decision to let Madhabi Puri Buch exit as SEBI chairperson at the end of her three-year term is welcome. Tenures can be extended at the three-year point, and often are, but Buch’s term was controversial, to put it mildly, and a goodbye at this point was possibly the best way to put a lid on a can of worms.

Another matter that her exit itself was embroiled in a controversy over alleged inaction and collusion in a share listing that predates Buch’s time in office. Without being distracted by that non-event, it can be said the first woman head of India’s securities market police retired under a cloud. She took a lot of flak from within SEBI and has left the reputation of that once-revered institution in tatters.

The stock market is a volatile space; to carry conviction with all participants in that market and to inspire the confidence of investors, it is crucial that the market regulator’s independence and integrity are above suspicion. Buch’s time in office will possibly be remembered as the period when SEBI’s moral authority was at its nadir.

When the blowout over the Hindenburg allegations first hit SEBI, Buch and her husband Dhaval Buch, also caught in the storm, issued a formal clarification. They began by flaunting their educational pedigree: she is an alumnus of IIM Ahmedabad, he a graduate of IIT Delhi. What did their elite degrees have to do with the allegations levelled against them? Except to signal that people with their pedigree were somehow above suspicion, as if to say: ‘how did you even think we could do this?’

Many tend to drink the Kool-Aid in an India where narratives are gift-wrapped and sold in the by-lanes of WhatsApp. The market for these stories has grown in recent years — from the big con that the Indian economy is roaring, manufactured right at the top of the political order, to the many colours and flavours and versions of that cheerful delusion, sold by minions down the line.

The fact that people fall for appearances and grand claims does not prove the Buchs’ wrongdoing; it simply shows they know that pedigree can give you a free pass.

Taking the low road of technical compliance is not good enough for people in public office — the expectation is that they will take the high road of unimpeachable integrity. Even if Buch’s defence of her case is considered valid, forgetting the unmissable Buch–Adani entanglement, her defence is at best about technical compliance or checking the necessary boxes.

We will need a new set of investigations to get at the truth; of the kind that were needed in the case of Buch’s former colleague at ICICI Bank, Chanda Kochhar, who was also first given a clean chit based on reported compliance, and then sacked as the rottenness at India’s (then) largest private sector bank was uncovered by Justice B.N. Srikrishna.

Without a similar inquiry in this case, the real story of how and why REITs (Real Estate Investment Trust funds) were aggressively promoted by SEBI, how Dhaval Buch’s employer Blackstone profited from these, and why SEBI did not really probe the Adani Group will remain buried in the reports of compliance that are being bandied about. This is not even about questioning the desirability or wisdom of financialising housing markets via REITs promoted by Buch, or how they impact the property market and common citizens.

The government, which has done its best to protect Buch — yet another can of worms — will hope that her retirement will be the end of this sordid saga, but we should hope that there’ll be a fuller investigation sooner rather than later.

Some argue that people who come into public life via the private sector, especially those who have known high salaries, ESOPs and bonuses, the so-called HNIs (high net worth individuals) with holdings and lifestyles to match, might parlay their connections effectively into high public office.

While allowances must be made for exceptions, we must ask what qualifications or regulatory experience such a background brings. Especially given the tendency in new India to hand over the levers of power to the ultra-wealthy and connected, in a sort of plutocratic takeover. The true worth of these so-called star performers, those of the elite degrees, is a matter for another discussion.

Another bald reality needs a reckoning: can any SEBI chairperson in present-day India talk or act against a power centre like Adani? That is the great bind of the day, and it is showing in the erosion of institutions across the board. In the present case, though, the SEBI chair stands accused of being a willing accomplice.

When there isn’t safe distance between the regulator and the regulated, you are inviting big-ticket misgovernance. SEBI won’t recover from this blow to its credibility anytime soon. The way to get there soonest is to order a judicial inquiry. That would be the way to showcase a “robust regulatory framework that aligns with best global practices”, a framework that “ensures [the] protection of investors”, to quote a SEBI statement to counter the Hindenburg allegations against Buch.

Jagdish Rattanani is a journalist and faculty member at SPJIMR.

Article courtesy: The Billion Press