The regulator can work only if it is seen as working with independence and integrity, without which its efforts to police the hot and volatile space of securities markets can’t carry conviction
The decision to allow Madhabi Puri Buch to exit SEBI as the chairperson at the end of her three-year term is to be welcomed. Tenures at the three-year point can be extended, and often are, but the situation in this case was such that a decent goodbye was the easiest way to put a lid on what remains a can of worms. It is another matter that the exit itself was embroiled in another controversy on alleged inaction and collusion in a share listing that dates to the time before Buch took charge. 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, invited flak from within SEBI, and left with a lot of questions on the credibility and reputation of the institution she led.
SEBI can work only if it is seen as working with independence and integrity, without which its efforts to police the hot and often volatile space of India’s securities markets cannot carry conviction. That loss of conviction will remain the big imprint of this tenure.
When the blowout over the Hindenburg allegations first hit SEBI and Buch, she and her husband Dhaval Buch, also caught in the storm, issued a formal clarification that began by flaunting their educational pedigree. She is an alumnus of IIM Ahmedabad; he a graduate of IIT Delhi. How do the public read this priceless nugget, its ode to elite education, and its relevance if any to the allegations that caused the clarification to be issued? While there are many ways to see it, the obviously highlighted degrees were at least in part meant to set the frame and say the unstated: how do you even think we did some wrong?
Many tend to drink the Kool Aid in an India where narratives are gift-wrapped and sold across the bylanes of WhatsApp. The market for these wares has been expanded in recent years – from the story that the economy is roaring to many colours and flavours and versions sold by minions who trade in some similar stuff down the line. None of this is to pass judgement on Buch, but to observe that there appears to an ingrained belief that it’s all about attractive wrappers for the masses to buy, even to celebrate.
Some pointers stand out in this not-so-complex case. The first is that the low road of technical compliance is very different from the high road of integrity in public life. Even if Buch’s defence of her case is to be regarded as valid, forgetting the unmissable Buch-Adani entanglements, her defence at best has been all about how technical compliance was achieved, and suitable boxes were ticked. We will need a new set of investigations to get at the truth, like indeed were required in the case of Buch’s former colleague at ICICI Bank Chanda Kochar, who was similarly 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 BN 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 Buch’s husband’s employer Blackstone profited from these, and why SEBI did not quite probe the Adani group, will remain buried in the reports of compliance being bandied about. This is not to ask other questions on the desirability and wisdom of the financialisation of housing markets via the REITs promoted by Buch, and how they impact the property market and common citizens. While the government may hope that Buch’s retirement would set matters at rest, the case must and will invite a fuller probe, some day or another.
The second is the argument offered sometimes that private sector players who have lived their lives on high salaries, ESOPs and bonuses will necessarily be high net worth individuals, and their investments and holdings and lifestyle will necessarily reflect their super-rich status. This is true, and while some allowance must be made, it is equally true that power and connections throw up new opportunities that work well with wilful blindness. Further, a democratic nation must also ask what specific qualifications or regulatory experience does such a background bring? The question will have to weigh against an increasing tendency seen in India to hand over the levers of power to the ultra-wealthy and the connected, almost forming a controlling club where birds of a feather flock together. The true worth of these so-called star performers and the real value of their contribution is in itself a matter for another discussion. The world needn’t buy their self-proclaimed and crude ideas of talent or their markers of high achievement.
The third is the point, quite fair, that no SEBI chair can talk let alone act against a top business tycoon in the reality of the India of today. That is indeed the political bind of the day, and its toll is being paid in the degrading of institutions across the board. But here, it was the chair being accused of playing the game, too. Rather than high marks for professionalism, this is seeking high marks for connections and cover-ups. The distance between the regulator and the regulated stands erased for the select few. The question that pops up is simple: who really makes these appointments, and how do they strengthen the institution? Do note that some concerns on investments and questions on disclosures dated from the time Buch was a whole-time director of SEBI, before becoming chairperson.
All of the above normalises misgovernance, which feeds into misgovernance of a million other kinds that the government may not bother about today, but which, small and the big together, eats into the vitals of the institution and hollows it out from the inside. All of this is the unseen drama while stories are sold about the nuts and bolts being tightened, a focus on the trivial while the substantive issues are ignored, and the nation is taken for a ride. The desire to bring order down the line cannot translate into action when there is no desire to keep clean up the line. The tensions that follow can be institution killers. They tear apart the fabric of governance. Some part of the tensions that led SEBI staffers to stage a protest against the highhandedness of Buch may be traced to this.
It will take a long time for SEBI to recover. The best way to shorten this time span is to order a judicial inquiry into all that has just gone by. That would be the best way to showcase a “robust regulatory framework that not only aligns with best global practices but also ensures protection of investors”, to quote a SEBI statement issued to counter the Hindenburg allegations against Buch.
The Billion Press (Jagdish Rattanani is a journalist and faculty member at SPJIMR.)
