What Sebi intends to do to protect investors from volatility in market: SC

The Supreme Court on Friday asked the Securities and Exchange Board of India (SEBI) what the capital markets regulator intends to do for ensuring the protection of investors from extreme volatility in the stock market.

While hearing a batch of pleas concerning the Adani-Hindenburg row, a bench headed by Chief Justice D Y Chandrachud observed one of the principal reasons which led the apex court to intervene in these petitions was the extreme volatility of stock market.

"Now what does SEBI intend to do to protect this kind of volatility... which leads to a loss of investor value," the bench, also comprising justices J B Pardiwala and Manoj Misra, asked Solicitor General Tushar Mehta, who was representing the SEBI.

"Has SEBI looked at whether it is necessary to tighten the regulations. What is SEBI intending to do in terms of ensuring the protection of investors," the bench said.

"We must," Mehta said.

The bench said SEBI has to take steps to ensure that instances of loss of investors' wealth, consequent on short selling or volatility in the stock market, were obviated in the future.

"What has SEBI done on investigating the volatility in the market," the court asked.

Mehta told the bench about the steps taken by the SEBI.

The bench reserved its order in the matter.

The bench also expressed its reservation in directing SEBI to investigate the matter based on some media reports which were relied by one of the petitioners.

At the outset, the solicitor general apprised the bench that investigation in 22 out of the 24 cases relating to allegations against the Adani group were over.

"For remaining two, we need information from foreign regulators etc. and some other information. We have been in consultation with them. Some information has come but that is where we are not in control of the time limit for obvious reasons...," he said.

During the hearing, the bench also asked whether the SEBI has found any element of wrong doing in so far as short selling was concerned.

Mehta said wherever the capital markets regulator has found short selling, they are taking action as per the SEBI Act.

He said so far as regulatory framework was concerned, suggestions from the apex court appointed expert committee was there.

"So far as the report of the expert committee is concerned, in principle, the suggestions are not objected to," he said.

Advocate Prashant Bhushan, appearing for one of the petitioners, also argued in the matter and questioned the credibility of the SEBI's probe.

The bench also heard submissions of advocates appearing for the other petitioners.

On May 17, the apex court had granted SEBI time till August 14 to complete its probe into the allegations of stock price manipulation by the Adani group.

A Supreme Court-appointed expert committee had in an interim report in May stated that it saw "no evident pattern of manipulation" in billionaire Gautam Adani's companies and there was no regulatory failure.

It, however, cited several amendments the SEBI made between 2014 and 2019 that constrained the regulator's ability to investigate, and its probe into alleged violations in money flows from offshore entities has "drawn a blank".

The apex court had on May 17 directed that copies of the report submitted before it by the top court-appointed Justice (retd) A M Sapre expert committee be made available to the parties to enable them to assist it in further deliberations in the matter.

Adani Group stocks had been bludgeoned on the bourses after Hindenburg Research made a litany of allegations, including those about fraudulent transactions and share-price manipulation, against the business conglomerate.

The Adani Group dismissed the charges as lies, saying it complies with all laws and disclosure requirements.