Editor's Pick: SC calls on SEBI to help protect investors after Adani rout

The Supreme Court on Friday asked the Securities and Exchange Board of India (SEBI) and the government to produce the existing regulatory framework in place to protect Indian investors, who are mostly middle class and reported to have lost several lakhs of crores in the past two weeks after the U.S.-based short-seller firm Hindenburg Research published a report, accusing the Adani Group of stock manipulation and accounting fraud, which led to sudden market volatility following a meltdown in its shares. Assuring the SEBI that it does not intend to go on a “witch-hunt” and is more interested in an “open dialogue”, a three-judge Bench led by Chief Justice of India D.Y. Chandrachud flagged the court’s concern for Indian investors and highlighted the need to protect them from such sudden market volatility in the future. “How do we ensure protection of Indian investors? Usually, this may happen on a small scale, but reports in newspapers say the total loss suffered by Indian investors may go in the range of several lakh crore in terms of investor value,” CJI Chandrachud told Solicitor General Tushar Mehta, appearing for SEBI. Chief Justice Chandrachud said the stock market was no longer a place for just “high value investors” to dabble in. “It is also a place now where a whole wide spectrum of the middle class are investing due to changes in the financial and tax regimes… There is a need for circuit-breakers here,” the CJI told Mr. Mehta. The court asked SEBI to submit a note by Monday detailing the legal and factual aspects of the existing regulatory framework for the securities market. Eight of 10 Adani Group shares declined on Friday, with flagship Adani Enterprises slumping 4.15% on the BSE, after index provider MSCI names the company among four group stocks for which it had cut the free float designation. Reuters cited analysts as saying that a change in free float status could affect the weightings of MSCI index constituents, possibly triggering a shift by funds as many investments are aligned to such indexes. The changes would come into effect on March 1. Separately, Moody’s Investors Service said it had cut the rating outlook of four Adani Group companies to ‘negative’ from ‘stable’. In Parliament, members of the Congress and some other Opposition parties staged a walkout in the Rajya Sabha on Friday after the Leader of the Opposition Mallikarjun Kharge was not allowed to speak in the House. Addressing a press conference later in the day, Mr. Kharge said, “Expunging my comments on the Adani Group will not erase the allegations.” He read out portions of his expunged speech and accused the Narendra Modi-led government of exerting undue pressure on the presiding officers of both Houses of Parliament to scuttle the issue. “Is it a crime to demand a probe by a Joint Parliamentary Committee on the Adani Group considering the people who have investments in SBI and LIC are deeply worried with the Adani Group’s market share dipping alarmingly after the Hindenburg revelations?” he asked. With the Supreme Court saying it could even consider constituting an expert committee of domain experts in banking and securities along with a former judge to act as a “wise guiding force,” this story becomes an important one. 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[Arrow]( [Open in browser]( [Mail icon]( [More newsletters]( SC calls on SEBI to help protect investors after Adani rout The Supreme Court on Friday asked the Securities and Exchange Board of India (SEBI) and the government to [produce the existing regulatory framework in place to protect Indian investors]( who are mostly middle class and reported to have lost several lakhs of crores in the past two weeks after the U.S.-based short-seller firm Hindenburg Research published a report, accusing the Adani Group of stock manipulation and accounting fraud, which led to sudden market volatility following a meltdown in its shares. Assuring the SEBI that it does not intend to go on a “witch-hunt” and is more interested in an “open dialogue”, a three-judge Bench led by Chief Justice of India D.Y. Chandrachud flagged the court’s concern for Indian investors and highlighted the need to protect them from such sudden market volatility in the future. “How do we ensure protection of Indian investors? Usually, this may happen on a small scale, but reports in newspapers say the total loss suffered by Indian investors may go in the range of several lakh crore in terms of investor value,” CJI Chandrachud told Solicitor General Tushar Mehta, appearing for SEBI. Chief Justice Chandrachud said the stock market was no longer a place for just “high value investors” to dabble in. “It is also a place now where a whole wide spectrum of the middle class are investing due to changes in the financial and tax regimes… There is a need for circuit-breakers here,” the CJI told Mr. Mehta. The court asked SEBI to submit a note by Monday detailing the legal and factual aspects of the existing regulatory framework for the securities market. Eight of 10 Adani Group shares declined on Friday, with flagship Adani Enterprises slumping 4.15% on the BSE, after index provider MSCI names the company among four group stocks for which it had cut the free float designation. Reuters cited analysts as saying that a change in free float status could affect the weightings of MSCI index constituents, possibly triggering a shift by funds as many investments are aligned to such indexes. The changes would come into effect on March 1. Separately, Moody’s Investors Service said it had [cut the rating outlook of four Adani Group companies]( to ‘negative’ from ‘stable’. In Parliament, members of the Congress and some other Opposition parties staged a walkout in the Rajya Sabha on Friday after the Leader of the Opposition Mallikarjun Kharge was not allowed to speak in the House. Addressing a press conference later in the day, [Mr. Kharge said]( “Expunging my comments on the Adani Group will not erase the allegations.” He read out portions of his expunged speech and accused the Narendra Modi-led government of exerting undue pressure on the presiding officers of both Houses of Parliament to scuttle the issue. “Is it a crime to demand a probe by a Joint Parliamentary Committee on the Adani Group considering the people who have investments in SBI and LIC are deeply worried with the Adani Group’s market share dipping alarmingly after the Hindenburg revelations?” he asked. With the Supreme Court saying it could even consider constituting an expert committee of domain experts in banking and securities along with a former judge to act as a “wise guiding force,” this story becomes an important one. [Arrow][Quiet contest: On the upcoming Nagaland Assembly elections]( [Arrow][The pension conundrum: On the EPFO resource base]( The Hindu’s Daily News Quiz Where will an undersea tunnel be constructed for the Mumbai-Ahmedabad High Speed Rail Corridor? - Thane - Diu - Khambat - Kalyan Jn. To know the answer and to play the full quiz, [click here](. Are you a book lover looking for your next literary adventure? Look no further than “The Hindu On Books” weekly newsletter! We scour the shelves to bring you the best new releases and hidden gems in all genres. With in-depth book reviews and recommendations, you can trust that you will find your next literary love here. Sign up now and discover your next favorite book!" 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