Topic of the Day – Serious Fraud Investigation Office (SFIO)

UPSC Exam Preparation: Topic of the Day – Serious Fraud Investigation Office (SFIO)

Serious Fraud Investigation Office (SFIO) is a fraud-investigating agency set up to investigate corporate frauds of very serious and complex nature. The mandate of SFIO is limited to investigating frauds relating to a company under the Companies Act and its investigation is considered separate from other normal investigation into the affairs of the company.

  • SFIO falls under the jurisdiction of the Ministry of Corporate Affairs
  • The SFIO is involved in major fraud probes. It coordinates with the Income Tax Department and the Central Bureau of Investigation for fraud investigation.

Why was it setup?

  • SFIO was set up in the backdrop of stock market scams of 2000-02, phenomena of plantation companies and vanishing companies and failure of non-financial banking companies.
  • Based on the recommendation of Naresh Chandra Committee on corporate governance (appointed by the Government of India in 2002) and in the backdrop of stock market scams as also the failure of non-banking companies resulting in huge financial loss to the public, Vajpayee Government decided to setup SFIO on 9 January 2003

Powers of SFIO

As per the resolution of 2nd July 2003, SFIO is to take up only investigation of frauds characterized by:

  • Complexity, having inter-departmental and multi-disciplinary ramifications.
  • Substantial involvement of public interest to be judged by size, either in terms of monetary misappropriation or in terms of the persons affected
  • The possibility of investigations leading to, or contributing towards, a clear improvement in systems, laws or procedures.

Process

  • SFIO starts an investigation only after reception of an order from the Union government in this respect which means, it cannot take up cases suo moto.
  • If any case has been assigned by the Central Government to the SFIO for investigation under Companies Act, 2013 no other investigating agency of the Central Government or any State Government can embark upon the investigation in such cases and in case any such investigation has already been initiated, it cannot be proceeded further with, and the concerned agency have to transfer the relevant documents and records in respect of such offences tothe Serious Fraud Investigation Office.

Can SFIO Arrest?

  • The Serious Fraud Investigation Office (SFIO) has powers to arrest people for violations of company law.
  • The directo, as well as additional or assistant director level officials at the SFIO,O have the authority to arrest a person if they believe that the person guilty of any offence with regard to the case being probed. There has to be a written record of the reason forthe arrest.
  • The competent authority for all the matters and decisions relating to the arrest is the director of SFIO.
  • Prior written approval of the central government is necessary for the arrest of a person in connection with a government or a foreign company under investigation.

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