Government plans special wing to vet corporate claims

One of the important tasks of the Market Research and Analysis Unit (MRAU), to be set up within the Serious Fraud Investigation Office (SFIO), would be to provide early signals of corporate wrong doings to the government, a senior official of the Corporate Affairs Ministry said.

The new unit, official said, would work in close coordination with market regulator Securities & Exchange Board of India (Sebi), the Enforcement Directorate, the Income Tax Department and the Reserve Bank of India.

Siphoning of funds

“Media reports aimed at inflating share prices of companies or those suggesting siphoning of funds by promoters through stake sale would be a good fodder for us to keep an eye on those entities,” the official said.

The idea behind setting up of MRAU, the official said, “is not to monitor frauds, but to set up a risk management system to catch early signals and take preventive action.” The decision to set up a specialised unit to prevent frauds was prompted by multi-crore rupee Satyam scam which continued for years.

SFIO to house the arm

SFIO, which will house the specialised market research unit, was involved in investigation of the Satyam fraud and had already submitted its report to the Corporate Affairs Ministry.

A government-appointed committee has recommended a separate Act for the Serious Fraud Investigation Office incorporating a provision for ‘whistle blower’ to check financial frauds at early stage.

The Vepa Kamesam Committee, set up in 2006 to review the functioning of the investigating agency, has recommended to the Ministry that there should be a whistle blower policy in the Companies Act in the short run and in the SFIO Act in the long run to detect corporate frauds at early stage. The panel has also recommended a “separate statute for the Serious Fraud Investigation Office should be considered in the long run” apart from its recognition in the Companies Act.

The eight-member committee, headed by former deputy governor of Reserve Bank of India, Vepa Kamesam, submitted its report recently to the ministry and has suggested the future course of action for the investigating agency.