SEBI and Regulation of Securities Markets: Adani Group Settlement

Context

On 22 September 2026, SEBI settled proceedings against five Adani Group companies for ₹1.508 crore over alleged disclosure violations involving related-party transactions and audit reports. The settlement, linked to SEBI’s examination following the 2023 Hindenburg report, was made without admission or denial of the findings.

About Securities and Exchange Board of India (SEBI)

1. SEBI is India’s statutory regulator of the securities market. Its main objectives are to protect investors, develop the securities market and regulate its functioning.
2. It was established in 1988 as a non-statutory body and became a statutory body under the SEBI Act, 1992.
3. Before SEBI, the Controller of Capital Issues (CCI) regulated capital issues under the Capital Issues (Control) Act, 1947.

Composition

Under Section 4 of the SEBI Act, 1992, the Board consists of:

1. A Chairperson;
2. Two members from the Central Government dealing with Finance and related administration;
3. One member from the Reserve Bank of India (RBI); and
4. Five other members, of whom at least three must be whole-time members.
5. Removal: The Central Government may remove a member on specified grounds, such as insolvency, unsoundness of mind or conviction for an offence involving moral turpitude.

Key Functions and Powers

1. Regulation: Regulates stock exchanges, mutual funds, depositories, credit-rating agencies, portfolio managers and other securities-market intermediaries.
2. Disclosure & Governance: Sets disclosure and corporate-governance norms for listed companies to protect investors.
3. Investigation: Can conduct inspections, inquiries, audits and investigations and seek relevant information.
4. Quasi-Legislative: Frames regulations under powers delegated by law.
5. Quasi-Executive: Enforces regulations and can issue directions against violators.
6. Quasi-Judicial: Adjudicates violations and can impose monetary penalties and other regulatory measures.
7. Market Integrity: Acts against insider trading, fraudulent and unfair trade practices, and violations related to takeovers and acquisitions.

Key Regulatory Concepts

1. Related-Party Transactions (RPTs)

• Meaning: Transactions between a company and its related parties, such as subsidiaries, associates or connected persons.
• Disclosure: Listed companies must properly disclose RPTs to ensure transparency and protect shareholders.
• Concern: Poor disclosure can hide conflicts of interest and affect investors’ assessment of the company’s financial position.
• Relevance: The recent Adani Group case highlights the importance of compliance with RPT disclosure norms.

2. Front-Running

• Meaning: It is an unfair trading practice in which a person trades securities using advance knowledge of a significant transaction that is expected to influence market prices.
• Example: if a person knows that a large institutional order is about to be executed and purchases the security beforehand for personal gain, then selling after the price rises.
• Regulation: SEBI prohibits such practices to maintain market integrity and investor confidence.

Appeal Mechanism

1. First Appeal: Orders of SEBI or its Adjudicating Officer can be challenged before the Securities Appellate Tribunal (SAT).
2. Status of SAT: SAT is a statutory tribunal established under the SEBI Act, 1992, not under Article 323 of the Constitution.

3. Composition: The Presiding Officer must be a sitting/retired Supreme Court Judge, a Chief Justice of a High Court, or a High Court Judge with at least 7 years of service.
4. Powers: SAT has powers similar to those of a Civil Court while adjudicating cases.
5. Further Appeal: An aggrieved party can appeal to the Supreme Court within 60 days, but only on a question of law.

So, SEBI → Securities Appellate Tribunal (SAT) → Supreme Court.

Significance

1. Investor Protection: Disclosure norms reduce information asymmetry and help investors make informed decisions.
2. Corporate Governance: RPT regulation promotes transparency and helps prevent conflicts of interest.
3. Market Integrity: Action against insider trading and front-running promotes fair markets.
4. Regulatory Oversight: The case highlights SEBI’s role in enforcing listing and disclosure norms.

Challenges

1. Market Complexity: Rapid changes in derivatives, algorithmic trading and digital finance make supervision more difficult.
2. Information Asymmetry: Retail investors may lack timely and clear information about market risks.
3. Enforcement Delays: Prolonged investigation and adjudication can weaken regulatory deterrence.
4. Regulatory Gaps: Complex corporate structures and new financial activities can create regulatory arbitrage.
5. Capacity Constraints: Effective oversight requires continuous investment in technology, expertise and regulatory capacity.

Way Forward

1. Technology-Based Surveillance: Use AI, data analytics and real-time monitoring to detect market irregularities.
2. Stronger Disclosure: Ensure timely, standardised and transparent disclosures by listed entities.
3. Faster Enforcement: Strengthen investigation and adjudication to ensure timely action against violations.
4. Regulatory Coordination: Improve coordination among SEBI, RBI, stock exchanges and other regulators.
5. Investor Protection: Expand financial literacy, grievance redressal and investor awareness mechanisms

FAQs

Q1. When was SEBI established and when did it become a statutory body?
Ans. SEBI was established as a non-statutory body in 1988. It became a statutory body under the SEBI Act, 1992.

Q2. What are the three core objectives of SEBI?
Ans. SEBI seeks to protect investors, promote the development of the securities market, and regulate the securities market.

Q3. What is a related-party transaction?
Ans. An RPT is a transaction between a company and a related entity or person.

Q4. What is front-running?
Ans. Front-running means using advance knowledge of a large transaction to trade for personal gain, making it an unfair market practice.