SEBI's transparency worries linger, despite the Lokpal clearing Madhuri Puri Buch

The Lokpal of India has dismissed all three complaints against former SEBI Chairperson Madhabi Puri Buch — even as her successor recently acknowledged that “not even minimal disclosures” were made during her tenure.

The striking contrast between the clean chit and the regulator’s own admission has sparked fresh debate over SEBI’s internal ethics framework and the credibility of the high-level committee (HLC) tasked with its overhaul.

The complaints, filed between August and October 2024, accused Buch of failing to disclose potential conflicts of interest — including an investment in a fund tied to an Adani group director, property income linked to a pharmaceutical firm, and receipt of ICICI Bank stock options — at a time when she held regulatory power.

The Lokpal, in an order dated 28 May, found no prima facie evidence to proceed under the Prevention of Corruption Act, calling the complaints “vexatious” and lacking substantiation.

Yet just weeks ago, Pandey, the current SEBI chief, publicly admitted that there had been “virtually no public disclosures” during Buch’s time in office — a rare instance of a sitting regulatory head publicly criticising a predecessor on governance grounds.

His remarks have raised eyebrows in legal and regulatory circles, particularly in light of the Lokpal’s firm dismissal of the same concerns.

Wah!! Now maybe Lok Pal will ask current SEBI chairman about his interview where he said not even minimal disclosures were made! Maybe SC or Lok Pal will suo moto cancel High Level Committee to rework SEBI ethics code? Why bother no? Sab Changa Si!! Agree? https://t.co/tFXR4vRg0o https://t.co/pYdu91zZNT

— Sucheta Dalal (@suchetadalal) May 29, 2025

The contradiction is striking: while the country’s top anti-corruption watchdog has ruled out any wrongdoing, the head of the very institution in question has acknowledged that standards expected of SEBI’s top brass were not met.

This incongruity has triggered speculation about whether the Supreme Court or even the Lokpal itself may be compelled to revisit the issue — not in terms of personal culpability, but in light of the systemic failures the current SEBI chair has brought to light.

Legal experts say that Pandey’s remarks, which imply regulatory lapses at the highest level, could lead to questions about SEBI’s Board oversight during Buch’s tenure and whether her non-disclosures were known and condoned. If nothing was disclosed, how were key decisions reviewed for conflicts? And if disclosures were made privately but not made public, does that fulfil the regulator’s duty of transparency?

“There is now a disconnect between what the Lokpal has ruled and what SEBI itself appears to acknowledge. The issue isn’t just about Buch any more — it’s about whether the institution has lived up to its own principles,” said a former member of SEBI’s Advisory Committee.

There is mounting speculation that the Supreme Court, which has previously taken suo motu interest in the Adani–Hindenburg matter, may consider revisiting the governance angle — particularly the formation of the high-level committee established to rewrite SEBI’s conflict-of-interest norms.

Critics argue that if the current ethics framework allowed Buch to operate without disclosing key interests, then reforms need to be not only sweeping, but also credible and independent.

Some suggest that either the Lokpal or the apex court may consider scrapping the existing HLC altogether and order a reconstitution of the panel — free from any influence of those involved in the prior regime.

“It would be unusual, but not unthinkable, for a court to call for a more neutral mechanism — especially when SEBI’s own leadership admits there was a vacuum in transparency,” said a Delhi-based constitutional lawyer.

At the heart of the matter lies a deeper question: Can a regulator that mandates strict compliance from listed companies operate on discretionary, non-binding codes of ethics for its own leadership?

SEBI’s conflict-of-interest policy, drafted in 2008, remains voluntary, vaguely defined and limited in scope. So yes, the current debate could become a watershed moment for regulatory accountability.

The proposed reforms being discussed by the HLC include binding asset disclosures, full divestment of equity stakes prior to appointment and public declarations of interests. Yet, unless the process is distanced from individuals or institutions perceived to be part of the problem, it may struggle to earn public confidence.

While Buch has been formally cleared, the issue of institutional responsibility remains unresolved. As one financial columnist wrote this week, “The regulator may have closed the file on Buch, but SEBI’s soul-searching has only just begun.”