FIR Against Former SEBI Chairperson Madhabi Puri Buch In GDR Scam

Madhabi Puri Buch made history as the first woman to lead the Securities and Exchange Board of India (SEBI), serving as its chairperson from March 2022 to February 2025. Her tenure was marked by significant reforms aimed at enhancing transparency, investor protection, and technological integration in India’s financial markets.

Key Achievements as SEBI Chairperson

1. Advancement of Settlement Cycles: Under Buch’s leadership, SEBI transitioned the Indian securities market from a T+2 (trade date plus two days) settlement cycle to T+1 and eventually to T+0. This shift ensured that investors received their funds and securities more swiftly, aligning with global best practices.
2. Emphasis on Technology and Data Analytics: Recognizing the importance of technology in modern finance, Buch championed the use of data analytics and artificial intelligence within SEBI’s regulatory framework. This initiative aimed to bolster surveillance mechanisms and detect market anomalies more effectively.
3. Strengthening Investor Protection: Buch introduced stricter disclosure norms for corporations and mutual funds, ensuring that investors had access to timely and accurate information. She also focused on curbing insider trading and market manipulation by enhancing monitoring and enforcement mechanisms.
4. Corporate Governance Reforms: To improve corporate governance standards, Buch implemented policies that increased accountability among company boards and management, fostering greater trust among investors.

The Global Depository Receipts (GDR) Scam: An Overview

The GDR scam involved several Indian companies that misused Global Depository Receipts—financial instruments used by companies to raise capital from international markets. These companies issued GDRs with the intent to manipulate stock prices and siphon funds. Typically, a single entity would subscribe to the entire GDR issuance using loans secured by the GDR proceeds themselves, creating a facade of legitimate capital inflow while the actual funds never entered India.

For instance, in the case of Farmax India Limited, GDR proceeds amounting to $71.9 million were not repatriated to India, despite the absence of bona fide future forex requirements.

SEBI’s Actions Against the GDR Scam

SEBI undertook rigorous investigations into the GDR scam, leading to several enforcement actions:

• Penalties Imposed: SEBI imposed penalties totaling ₹1.25 crore on Nakoda Ltd and four individuals for their involvement in fraudulent GDR issuance.
• Asset Attachment: The Enforcement Directorate (ED) attached assets worth ₹59 crore belonging to entities like Pan Asia Advisors, linked to the GDR scam.
• Arrests Made: Key figures, such as Sanjay Raghunath Aggarwal, were arrested under the Prevention of Money Laundering Act (PMLA) in connection with the scam.

FIR Against Madhabi Puri Buch

Towards the end of her tenure, an Anti-Corruption Bureau (ACB) court ordered the filing of a First Information Report (FIR) against Madhabi Puri Buch in relation to the GDR scam. The court’s directive was based on allegations of negligence and lapses in regulatory oversight during her term.

Buch has denied any wrongdoing and has moved the Bombay High Court to quash the FIR, asserting that all regulatory actions during her tenure were in strict compliance with SEBI’s mandate.

Conclusion

Madhabi Puri Buch’s tenure as SEBI chairperson was characterized by progressive reforms that aimed to modernize India’s financial markets and protect investors. However, the challenges posed by financial malpractices like the GDR scam highlight the complexities regulators face in maintaining market integrity. The allegations against Buch underscore the need for continuous vigilance and robust oversight in the ever-evolving financial landscape.