The Hindu : Stage set for forming serious frauds probe office

Online edition of India's National Newspaper
Friday, Apr 04, 2003

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Stage set for forming serious frauds probe office

By Vinay Kumar

NEW DELHI APRIL 3. Following the recent series of scams, the Union Government is all set to establish a Serious Frauds Investigation Office (SFIO) which will look into corporate, stock, bank, tax frauds and related economic offences.

The multi-disciplinary SFIO will comprise a dozen senior officers from the Securities and Exchange Board of India (SEBI), the Income Tax Department, the Reserve Bank, nationalised banks, the Company Law Board, as well as chartered accountants.

An elaborate exercise is on in the Cabinet Secretariat to select the officers. The SFIO will function under the Department of Company Affairs (DCA). The Cabinet Secretary, Kamal Pande, is believed to have taken the initiative in expediting the selection process, and well-placed sources said the SFIO could become fully functional next month.

Though it would not have any police powers of prosecution, the SFIO, being modelled after similar organisations in the U.S. and U.K., would take up the case of frauds suo motu and refer them for investigation to departments such as the Income Tax or the Economic Offences Wing (EOW) of the Central Bureau of Investigation (CBI).

The SFIO may be headed by a senior IAS officer of the rank of Joint Secretary, the sources said adding efforts were on to rope in somebody who had already worked in the Home Ministry and was conversant with the functioning of the investigating agencies.

The Finance Minister, Jaswant Singh, had made a reference to the SFIO in his budget speech. Referring to the Naresh Chandra Committee report, he said corporate governance was high on the Government's agenda.

There would be a set of regulations which would not inhibit managerial initiative while instituting a mechanism for early detection of frauds and their prevention.

Three months ago, the Joint Parliamentary Committee (JPC) on the stock market scam had felt that there should be a surveillance mechanism to enable suo motu action on the erring companies. It pulled up the Department of Company Affairs, saying its inspectors were untrained and unable to cope with the quality of inspection.

The JPC had recommended that a separate body be set up to investigate all serious frauds and it should be backed up by legislation. It felt that jurisdictional powers of such a body should not be limited to conducting investigation against the employees of the Central Government and public sector undertakings, but should be comprehensive to cover the offences committed even by the employees of the State Governments as well as those in the private sector.

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