Opinion
To whom is Madhabi Puri Buch really accountable?
Summary
- Madhabi Puri Buch, the chairperson of Sebi, faces a slew of charges from various quarters—a short seller, the political opposition, an aggrieved corporate chieftain, and even Sebi employees. Some charges are downright silly, some petulant, some are plausible and yet another calls for an explanation.
To whom should Buch make this explanation? Who is institutionally responsible for holding her, or the head of any other statutory regulatory body, for that matter, to account? The realistic answer is piquantly vague, rather than definitive.
This must change. Regulators should be accountable to parliamentary standing committees on relevant subjects. The Securities and Exchange Board of India (Sebi) should testify quarterly before the standing committee on finance, where Buch can address the charges against her as part of her regular testimony.
Regulatory integrity must, of course, be substantive and visibly so. This makes it imperative to clear the air over the charges levelled against Buch. The manner in which this is achieved matters, too: there must be no regulatory vacuum, or dilution of regulatory authority or discontinuity — India’s securities markets are too important for unproven allegations to punch holes in its regulatory umbrella.
How serious are the charges against Buch?
It transpires that the allegation of harsh/foul language raised in a letter from Sebi employees to the finance ministry was an anonymous missive and not a representation from any Sebi employees’ association. Whatever its status, Buch should take care that efforts to improve efficiency and regulatory throughput at Sebi stay within conduct that qualifies to be called civilized.
After a clarification issued by ICICI Bank, where Buch worked before choosing voluntary superannuation in 2013 to join her husband in Singapore, the Congress party’s charge that she has been deriving an income from ICICI Bank while being employed at Sebi looks silly. Her remuneration at ICICI Bank included stock options, which vest for a number of years and have to be exercised within a stipulated time period. It is only natural that she would exercise her stock options, and realise the resultant income. Such earnings represent deferred payout of remuneration earned during employment, which, in Buch’s case, ended in 31 October 2013. Interpreting this as a current salary from ICICI Bank is absurd.
Read this | Sebi's Madhabi Buch worked at ICICI Bank and a PE firm between 2011 and 2013
Hindenburg Research raised three charges. First, Buch and her husband were investors in an overseas fund where Vinod Adani, brother of Gautam Adani, was also an investor. This would be incriminating only if the fund had few investors and invested solely in Adani stocks, but no such claim has been made. Buch could, however, clarify that this was not the case, while reiterating that she and her husband invested in the said offshore fund due to its chief investment officer, a friend from her husband's past, and they exited the fund when the said friend did.
The second allegation is that Sebi implemented regulations to support the growth of Real Estate Investment Trusts (Reits) while Buch's husband advised a Reit promoter. For the Indian economy to grow, it needs substantial office and commercial space, which Reits help finance by pooling and allocating capital. Sebi would have failed in its duty if it hadn’t supported Reit growth. It’s unreasonable to suggest that Buch should have hindered the development of Reits simply because her husband advised a promoter. The real question is whether she disclosed her spouse's involvement with Reits to the relevant authority at Sebi, as required by its employee regulations. There's little reason to believe she would have concealed this.
Subhash Chandra’s claim that Sebi scuttled Zee’s merger with Sony is laughable. Sony’s issues with the incumbent chief executive officer and the surrounding controversies unfolded in the public eye. The significance of the charge is that more people, who have had to feel the bite of regulatory steel, could come forward making accusations against the regulator, however pathetic they may be.
The most concerning charge, which is also the third Hindenburg allegation, is that Buch and her husband owned a consulting firm that remained operational while she was at Sebi. If the consultancy had a narrow clientele base and still earned substantial income, that could raise eyebrows all the way into the hairline. This matter has to be clarified.
Also read | Full disclosure for Sebi chief: Key to preventing next Hindenburg-like scandal
Which brings us back to the original question, to whom should Buch make these clarifications? To the government? A statutory regulator should be autonomous from the executive, not answerable to it. To be accountable to the president is to be accountable to the executive. To the Supreme Court? The judiciary’s job is to determine the legality of matters, including regulatory decisions and principles. Its job is not to hold regulators to account. Should the clarifications be made to the press, social media trolls, or to God?
This is where a committee of elected people’s representatives come in. And it would be an ideal fit.
