𝐒𝐄𝐁𝐈 𝐚𝐜𝐭𝐢𝐨𝐧 𝐚𝐠𝐚𝐢𝐧𝐬𝐭 𝐇𝐢𝐧𝐝𝐞𝐧𝐛𝐮𝐫𝐠 𝐦𝐚𝐲 𝐫𝐮𝐧 𝐢𝐧𝐭𝐨 𝐣𝐮𝐫𝐢𝐬𝐝𝐢𝐜𝐭𝐢𝐨𝐧𝐚𝐥 𝐰𝐚𝐥𝐥

The Hindu businessline has published an article highlighting the issues that SEBI might face while going for a legal battle against the US based research firm regarding the jurisdictional limitations. Earlier, SEBI has sent show cause notice to Hindenburg Research (which was publicly published by the Noticee while trashing it) and have accused the former of colluding to use non-public information to build short positions against the Adani Group.

Our Founder, and Partner 𝐌𝐫. 𝐒𝐮𝐦𝐢𝐭 𝐀𝐠𝐫𝐚𝐰𝐚𝐥 a former SEBI Officer mentioned that the US firm is neither registered with SEBI nor it is based out of India, its employees are not Indians, hence a jurisdictional issue would be a pertinent issue to deal with for Securities and Exchange Board of India. “𝐒𝐞𝐜𝐭𝐢𝐨𝐧 1 𝐨𝐟 𝐭𝐡𝐞 𝐒𝐄𝐁𝐈 𝐀𝐜𝐭, 1992, 𝐚𝐩𝐩𝐥𝐢𝐞𝐬 𝐭𝐨 ‘𝐰𝐡𝐨𝐥𝐞 𝐨𝐟 𝐈𝐧𝐝𝐢𝐚’ and courts interpret ‘nexus’ theory to ascertain whether a foreign entity would fall under the jurisdiction of SEBI,” Mr. Agrawal added.

He also highlighted the complexities SEBI might face in banning entities like Hindenburg. He mentioned that such actions could raise further questions about SEBI’s role and intentions. He further noted that courts may need to examine the case’s historical and future implications, with Hindenburg potentially arguing that SEBI’s actions constitute malicious prosecution. This scrutiny could complicate SEBI’s position and necessitate a thorough review of the case’s regulatory context. The examination will determine whether issuing regulatory directives could suppress whistleblowing or free speech, while assessing whether the Hindenburg case provides sufficient facts and evidence to warrant enforcement action.

Another expert Mr. Ravi Prakash of Corporate Professionals views that SEBI might lead new global enforcement protocols and push for an international regulatory consortium to address challenges in the global securities market.

𝐌𝐫. 𝐊𝐡𝐢𝐭𝐢𝐣 𝐀𝐬𝐭𝐡𝐚𝐧𝐚, Singhania & Co. (S&Co.) expressed his views how Hindenburg would not be exempted from the violation mentioned by SEBI in the show-cause notice, specifically Regulation 12A of the SEBI Act, 1992, and Regulations 3 and 4 of the PFUTP Regulations, 2003.

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