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Adani Case Jeopardizes Credibility of Watchdog

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The $3.6 trillion Indian equity market is adjusting to its newfound tenacity. The Securities and Exchange Board of India, which oversees the nation's financial markets, penalized two media moguls in June for alleged fraud and tightened disclosure requirements for investors from abroad. The actions matched the aggressive persona of Chair Madhabi Puri Buch. However, an investigation into the business operations of infrastructure tycoon Gautam Adani could undo recent advancements.

Punit Goenka, the CEO of Zee Entertainment Enterprises, and Subhash Chandra, the person who founded the business, have been forbidden from holding any executive positions in a publicly traded organization. In addition, Sebi has banned Eros International Media from the securities market in two separate orders, demonstrating its willingness to take action against errant business owners. Additionally, it is requesting more information from foreign funds which have either invested over $3 billion in domestic shares or over half of their total assets under management within a single group of businesses. That's a subtly expressed recognition of the necessity to identify the ultimate beneficial holders of shares in the days following of the Adani disaster.

Since taking over in March 2022, Buch, a 57-year-old previous banker, has developed a reputation as a tough as nails leader. A rating agency was shut down by Sebi under her leadership for misconduct, and the organization has proposed a more expansive definition of price-sensitive data. She has argued that mutual funds need to be held more accountable. According to one market participant, the watchdog has improved communication with the regulator of banking and boosted investigative skills over the past year by hiring two previous bankers to prominent jobs.

These actions have upped the bar for Sebi. This makes its obvious passivity in the face of claims of stock price manipulation and accounting fraud against Adani's enterprise, which the magnate's organization denies, all the more noticeable.

According to two sources, the probe requires following the money trail across several different countries, which would be challenging for the regulator to handle. According to a Reuters story from May, a Supreme Court-appointed panel's findings that the investigation has "drawn a blank" and might be a "journey without a destination" reinforce that opinion. Working with different law enforcement agencies including the Directorate of Enforcement and the Directorate of Revenue Intelligence would be necessary if the Adani case was to be fully pursued. It's not apparent if one of these organizations is taking part in the investigation.

The deadline for Sebi's investigation is August 14. The regulator's hardest test under Buch's direction could jeopardize its growing credibility unless Buch's team pulls out all the stops.

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