Sebi has strong case against Hindenburg, say lawyers

The Indian market regulator, the Securities and Exchange Board of India (Sebi), has a strong case against US-based short-seller Hindenburg Research, who the former has alleged to have traded based on unpublished price-sensitive information.

- DEV CHATTERJEE

Lawyers said Sebi may rope in American regulators to enforce its orders, as and when it issues them after completing its investigation.

"Based on disclosures so far, Sebi seems to have prima facie good case against Hindenburg Research and its partner for indulging in short selling based on unpublished price-sensitive information," said RS Loona, managing partner of Alliance Law, a firm specialising in securities law. Sebi has jurisdiction over all persons, whether in India or overseas, dealing in or associated with the Indian securities market, he added.

Other lawyers echo similar views. H P Ranina, a Mumbai-based senior advocate, said Sebi has the jurisdiction to seek information from Hindenburg and its associates and then take action based on its investigation. "Hindenburg may move courts in India or may litigate in the US against Sebi," he added. Explaining the case and why Sebi has a strong case, Sidharth S Kumar, senior associate, BTG Advaya, said, Sebi has claimed in its showcause notice that the Hindenburg report is a research report on the securities of Adani Enterprises. "Therefore, Hindenburg has violated the provisions of the research analyst regulations. Furthermore, it is alleged that Hindenburg earned profit-based fees from Kingdon Capital, whereas shareholders in India lost money due to market volatility. Sebi has sufficient powers under Section 11 of the Sebi Act, which can be exercised when the interests of investors in the Indian securities market are in jeopardy. Even the Supreme Court has approved the extraterritorial jurisdiction of Sebi," says Kumar.