What does the SEC indictment of Adani mean, and is there an Indian equivalent?

Gautam and Sagar Adani are accused of misleading investors about Adani Green Energy Ltd's anti-corruption policies during a September 2021 bond offering, which raised $175 million from US investors

The United States Securities and Exchange Commission (SEC) has charged several individuals associated with Adani Green Energy Ltd and Azure Power Global Ltd in connection with a large bribery scheme. Those charged include Gautam Adani, chairman of Adani Green Energy Ltd, his nephew Sagar Adani, who serves as an executive director of the company, and Cyril Cabanes, a former board member of Azure Power. Cabanes has been charged for facilitating the bribery scheme while serving both in the US and abroad.

 

The indictment filed by the SEC highlights significant allegations of corporate corruption and bribery. But what does this mean?

 

 

What does an SEC indictment mean?

An SEC indictment refers to formal legal charges brought by the US SEC against individuals or companies for violating securities laws. In the case of Gautam Adani, Sagar Adani, and Cyril Cabanes, the charges involve serious allegations of securities fraud and bribery, including:

1. Violations of the Securities Exchange Act of 1934 by providing false statements in offering materials.
2. Committing securities fraud.
3. Cyril Cabanes being charged for violating the US Foreign Corrupt Practices Act (FCPA).

Violations of the Securities Exchange Act of 1934

The Adanis are accused of violating the antifraud provisions under this act, which prohibits deceptive practices in securities transactions. The SEC alleges that the Adanis misled investors by claiming that Adani Green Energy Ltd had strong anti-corruption policies in place during a September 2021 bond offering. This bond offering raised $175 million from US investors.

 

According to the SEC, these claims were misleading as Gautam and Sagar Adani were allegedly involved in a bribery scheme aimed at securing favourable energy contracts with the Indian government.

 

Securities fraud

The SEC has charged Gautam and Sagar Adani with securities fraud for failing to disclose their involvement in the bribery scheme. The omission allegedly misled investors about the integrity of their investments.

 

Foreign Corrupt Practices Act (FCPA)

The FCPA prohibits US individuals and companies from offering bribes to foreign officials. The SEC claims that Cyril Cabanes facilitated the bribery scheme, which allegedly helped Azure Power secure lucrative energy contracts in India, violating both US laws and corporate governance standards.

 

Where has the SEC case against Adanis and Cabanes been filed?

The SEC has filed its complaints in the US District Court for the Eastern District of New York.

  In parallel, the US Attorney’s Office for the Eastern District of New York has unsealed criminal charges against the Adanis and Cabanes. The case involves both civil securities violations and criminal charges for foreign bribery.

 

The SEC’s investigation is ongoing and has received support from US government organisations, including the Department of Justice and the Federal Bureau of Investigation (FBI).

 

What are the legal consequences the SEC is seeking?

The US SEC is seeking:

• Permanent injunctions.
• Civil penalties.
• Bars on Gautam Adani, Sagar Adani, and Cyril Cabanes from serving as officers or directors of any public company.

What would be the Indian equivalent of a US SEC indictment?

In India, the equivalent of a US indictment is typically a charge sheet or complaint in criminal cases. The process involves:

1. Complaint: Filed by an individual to initiate legal action. Common in minor crimes.
2. FIR: The First Information Report, filed by the police, marks the start of the criminal justice process.
3. Charge sheet: Filed by the police after an investigation, officially accusing someone of a crime and listing evidence.

These documents are akin to a US indictment but differ as Indian investigations do not involve a grand jury.

 

How will the SEC indictment impact Adani Green and Azure Power?

The indictment primarily targets the individuals involved in the alleged bribery scheme and does not name or initiate action against the companies.

 

However, since the news broke, stocks of Adani Group companies fell as much as 20 per cent in early trading on Thursday. Adani Green Energy shares declined 16 per cent. Azure Power is not listed in India.