Days after markets regulator SEBI submitted the status of its probe in the Adani-Hindenburg matter to the SC, reports say that the ED has investigated links of an Indian private bank and 15 more entities in the case related to short selling of Adani group companies’ shares.
A TOI report on Wednesday showed that the central investigative agency has shared its intelligence related to these 16 entities, which includes foreign portfolio investors (FPIs) with Securities and Exchange Board of India (Sebi).
While the ED cannot register a probe under the Prevention of Money Laundering Act (PMLA) until there is a predicate offence, the SEBI has the power to register a criminal investigation against any entity found involved in any suspicious activity with a potential to undermine fair legal practices.
In this case, if Sebi files a prosecution complaint, it can become the ground for the ED to initiate a probe under PMLA, TOI said.
The ED has gathered substantial intelligence against some Indian and foreign entities involved in seemingly “suspicious” activities in the Indian share market — some as early as November 2022 — related to the Hindenburg report and short-selling positions taken by them, TOI reported citing sources.
US-based short-seller Hindenburg on January 24 through a report alleged stock manipulation and fraud by the conglomerate led by Gautam Adani. The Adani Group has attacked Hindenburg as “an unethical short seller”, stating that the report by the New York-based entity was “nothing but a lie”. A short-seller in the securities market books gains from the subsequent reduction in the prices of shares.
The report says that few FPIs had taken short positions just two-three days before Hindenburg released its explosive report. They are currently being investigated to ascertain their beneficial ownership. The report further claims, citing sources, that most of these entities never dealt with Adani shares, and some were trading for the first time.
The SEBI investigation has uncovered violations of rules on disclosures by listed entities and limits on the holdings of offshore funds, news agency Reuters reported citing sources. The report characterised the violations as being of a “technical” nature that would attract no more than a monetary penalty once the investigation is complete, however.
Supreme Court, on March 2, set up an expert committee on the issue arising from the Hindenburg Research report on Adani Group companies. The committee will consist of six members, headed by former apex court judge Justice AM Sapre.
SEBI last week informed the Supreme Court that out of 24 investigations arising out of the Hindenburg report, 22 are final in nature and 2 are interim in nature.
SEBI submitted that with respect to the interim investigation reports SEBI has sought information from external agencies and 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 matters.
SEBI submitted that it shall take appropriate action based on the outcome of the investigations in accordance with law in various aspects.
(With agency inputs)
