Lokpal Seeks Explanation from SEBI Chief Amid Conflict-of-Interest Allegations

Lokpal Seeks Explanation from SEBI Chief Amid Conflict-of-Interest Allegations

Sub: Polity

Sec: National body

Why in News

The Lokpal of India has recently requested a response from Madhabi Puri Buch, the chief of the Securities and Exchange Board of India (SEBI), regarding allegations of a potential conflict of interest. This request follows a report by U.S.-based Hindenburg Research, which has raised questions about regulatory oversight in the Adani Group investigation.

Background:

The Lokpal has directed the head of SEBI to address conflict of interest allegations related to a report by a U.S.-based short-seller, which questioned SEBI’s handling of the Adani Group investigation.

A procedural order issued by the Lokpal Bench requires a detailed affidavit response to these charges within four weeks.

The complaints, filed between August and October 2024, raise concerns over SEBI’s transparency and alleged regulatory bias.

The case brings attention to regulatory accountability, especially regarding SEBI’s oversight in financial probes involving major corporate entities.

About Lokpal:

The Lokpal is an anti-corruption body that is authorised to investigate corruption charges against top public functionaries including the prime minister, Cabinet ministers, members of Parliament and Group A officials at the Centre.

Lokpal and Lokayuktas Act 2013: 

The Act allows for setting up of anti-corruption ombudsman called Lokpal at the Centre.

Composition: The Lokpal will consist of a chairperson and a maximum of eight members. 

• Chairperson should have been a Chief Justice of India, or is or has been a judge of the Supreme Court, or an eminent person who fulfils eligibility criteria as specified.
• 50% of the members are to be judicial members provided that not less than 50% of the members belong to the Scheduled Castes, Scheduled Tribes, OBCs, minorities, and women.

Inquiry Wing: Lokpal will have an Inquiry Wing for conducting preliminary inquiry into any offence alleged to have been committed by a public servant punishable under the Prevention of Corruption Act, 1988.

Prosecution Wing: It will also have a Prosecution Wing for the prosecution of public servants in relation to any complaint by the Lokpal under this Act.

Powers:

The Lokpal will have the power of superintendence and direction over any investigation agency including CBI for cases referred to them by the ombudsman.

As per the Act, the Lokpal can summon or question any public servant if there exists a prima facie case against the person, even before an investigation agency (such as vigilance or CBI) has begun the probe. Any officer of the CBI investigating a case referred to it by the Lokpal, shall not be transferred without the approval of the Lokpal.

An investigation must be completed within six months. However, the Lokpal or Lokayukta may allow extensions of six months at a time provided the reasons for the need of such extensions are given in writing.

Special courts will be instituted to conduct trials on cases referred by Lokpal.

Jurisdiction of Lokpal: It covers a wide range of public servants — from the Prime Minister (PM), ministers and MP, to groups A, B, C, D officers of the central government including the chairperson and members of the Lokpal. However, there are some exceptions for PM:

• Lokpal cannot inquire allegations against the PM relating to international relations, external and internal security, public order, atomic energy and space.
• Also, complaints against the PM are not to be probed unless the full Lokpal bench considers the initiation of inquiry and at least 2/3rds of the members approve it.

Such an inquiry against the Prime Minister (if conducted) is to be held in camera and if the Lokpal comes to the conclusion that the complaint deserves to be dismissed, the records of the inquiry are not to be published or made available to anyone.

About SEBI:

The Securities and Exchange Board of India, or Sebi, is expected to protect investor interests, promote the development of the securities market, and regulate it under the Sebi Act, 1992

Sebi has the authority to make rules, enforce them, and also adjudicate disputes under the Sebi Act, Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996, the Companies Act, 2013 and others.

Sebi works for the development and regulation of the securities market in India, ensuring investor protection through awareness programmes, financial literacy initiatives, and addressing investor grievances.

Sebi also works on global securities standards as part of the International Organization of Securities Commissions (IOSCO).