'No insinuations without evidence': Sebi chief cautions independent directors after HDFC Bank shock

Independent directors have to be responsible, and any comments made can have an impact on the interests of minority shareholders, Tuhin Kanta Pandey, the chairman of the Securities and Exchange Board of India, has said.

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Independent directors hold a very important position, and they may have the power to question the company. But, they are also required to be protectors of the interests of minority shareholders, he said in an interaction with reporters following the board meeting of the market regulator.

"Nobody is expected to make any insinuations without actually proper evidence in recording," stressed Pandey.

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The comments come in the backdrop of the part-time chairman of India's largest private sector lender HDFC Bank resigning last week, citing differences on values and ethics.

"Certain happenings and practices within the bank, that I have observed over the last two years, are not in congruence with my personal values and ethics," Atanu Chakraborty said in his resignation letter. He didn't elaborate on what the differences were, but stated there were no other material reasons for his resignation.

The sudden resignation led to a sharp selloff in the shares of HDFC Bank, at a time when the stock market had already been in turmoil amid the West Asia conflict.

Independent directors are required to adhere to a certain code of conduct, and where they have any concern about the running of the company or a proposed action, ensure that they are addressed by the board, and to the extent that they are not resolved, insist that their concerns are recorded in the minutes of the board meeting, the Sebi chairman pointed out.

"There is a process that is there, and if there is any concern, then it has to be there in the board meetings," he noted.

After Chakraborty resigned, the bank acted swiftly to appoint HDFC veteran Keki Mistry as its interim chairman.

Mistry stated that there were no material matters and there were no specific happenings and practises that were brought to the board’s attention.

The Reserve Bank of India also had clarified that the bank had sound financials and there were no material concerns on record as regards its conduct or governance.

Sebi on Monday cleared several proposals in its board meeting, including allowing foreign portfolio investors' net settlement of funds for transactions and providing flexibility to Alternative Investment Funds in winding up schemes and surrendering registration.

The board approved amendments to the ‘fit and proper person’ criteria specified under Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.

The board also considered the recommendations of a high-level committee that was set up to undertake a comprehensive review of the existing framework governing conflict of interest, disclosures and related matters in respect of Board Members and employees of Sebi.

Uniform application of restrictions on investments and trading in equity and equity-related instruments, other than permitted investments in mutual funds etc. to the chairman and whole-time members, as currently applicable to employees, was among the recommendations approved.