SAT dismisses appeals by five FPIs cited in Hindenburg report

The Securities Appellate Tribunal (SAT) has rejected appeals filed by five foreign portfolio investors (FPIs) who were named in the controversial Hindenburg Research report on Adani group entities. The tribunal's decision closes a significant chapter in the regulatory proceedings that followed the short-seller's allegations released in January 2023.

The five FPIs had approached SAT contesting the Securities and Exchange Board of India's (Sebi) adjudication process. They argued that Sebi's regulations mandate that an adjudicating officer must first form an opinion on whether a formal inquiry should be initiated before proceeding with enforcement action against them.

The appellants claimed that Sebi had circumvented this requirement and initiated formal inquiries without establishing the necessary foundational opinion as stipulated under the regulator's procedural rules. This procedural challenge formed the core of their legal arguments before the tribunal.

With SAT's dismissal of the appeals, the regulatory proceedings against these FPIs are expected to move forward without the additional procedural layer that the investors had sought to impose. The tribunal's decision reinforces Sebi's enforcement authority and its interpretation of the rules governing the adjudication process in such matters.

The Hindenburg report had raised allegations regarding related-party transactions and corporate governance concerns at Adani group companies. Sebi has been conducting investigations into various entities and investors linked to the allegations, with multiple proceedings ongoing across different stages of the regulatory process.