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Role of Regulatory
Authorities in
detecting Corporate
Frauds
By – Punit Agrawal (81021919002) BBA-LL.B. 3RD year
TABLE OF CONTENTS
Introduction
Introduction to Frauds
Types
Types of Fraud
FEO Act, 2018
Fugitive Economic Offenders
Act, 2018
SFIO
Serious Fraud Investigation
Office
Central Authorities
Role of Government
Agencies in Combatting
Corporate Fraud
SEBI
Role of Securities and
Exchange Board of India in
curbing Insider Trading
01 02 03
04 05 06
WHAT IS A FRAUD?
S/447 CA, 2013
As per this section “Fraud” in relation to affairs of a
company or anybody corporate means any act, omission,
concealment of any fact or abuse of position committed by
any person or any other person with the connivance in any
manner, with intent to deceive, to gain undue advantage
from, or to injure the interests of the company or its
shareholders or its creditors or any other person, whether or
not there is any wrongful gain or wrongful loss.
TYPES OF COPORATE FRAUDS
CORRUPTION
Corruption is a form of dishonest or
fraudulent conduct by those in
power and it typically involves
bribery.
ASSET
MISSAPROPRIATION
FRAUD
Asset misappropriation fraud
involves third parties or
employees in an organization who
abuse their position to steal assets
through fraudulent activity.
FINANCIAL
STATEMENT FRAUD
It can include deliberate falsification
of accounting records; omission of
transactions– either revenue or
expenses, non-disclosure of relevant
details from the financial statements
OTHER
INDICATORS
include Delay in finalization of
accounts; Frequent changes in
accounting policies; Continuing
losses; Over drawl of loans and
advances; Higher cost per unit of
production
01
02
03
04
CENTRAL AUTHORITIES
Many scams were unearthed during past few years and the enforcement agencies have
now become alert and proactive in monitoring instances of Corporate Fraud.
To monitor various frauds, a number of anti-corruption legislations have been enacted in
India which includes-
• Prevention of Corruption Act 1988 (PCA);
• The Benami Transactions (Prohibition) Act 1988,
• Prevention of Money Laundering Act 2002,
• Lokpal and Lok Ayukta Act 2013,
• Right to Information Act 2005 (RTI),
• Indian Penal Code 1860 (IPC)
FUGITIVE ECONOMIC OFFENDERS
ACT, 2018
The Act defines ‘fugitive economic offender’ as a person
against whom an arrest warrant has been issued by the
special court against a scheduled offence who has left India
to avoid criminal prosecution or refuses to return India to
face criminal prosecution.
The Fugitive Economic Offenders Act, 2018 ensures fugitive
economic offenders return to India to face the action in
accordance with law. This Act also facilitate the functioning
of the Prevention of Money Laundering Act, 2002.
In Famous Case –
• Vijay Vittal Mallya Case-
He became the first fugitive economic offender
under the new FEO Act, 2018
SERIOUS FRAUD INVESTIGATION
OFFICE
• Section 211 of the Companies Act, 2013
• The Serious Fraud Investigation Office (SFIO) is an Indian statutory corporate fraud
investigation authority.
• No other investigating agency shall proceed with investigation in a case in respect of
any offence under the Act, once the case has been assigned to SFIO. The SFIO has
power to arrest individuals if it has reason to believe that he is guilty based on the
material in possession. SFIO shall submit a report to the Central Government on
conclusion of investigation. Central Government may direct SFIO to initiate
prosecution against the company.
SEBI
• Primary securities market regulator.
• Power - The Securities and Exchange Board of India Act which aims
for preventing fraudulent practices.
• SEBI establishes governance norms for the securities market, ensuring
that issuers’ and investors’ interests are protected.
• The SEBI corporate governance guidelines are intended to promote a
safe, transparent environment for investors while also prohibiting
unfair acts such as insider trading.
• High-profile frauds - including those involving Harshad Mehta, Ketan
Parekh, Satyam (Land), and Nirav Modi Case (PNB)
THANK
YOU

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role of regulatory authorities in detecting corporate frauds.pptx

  • 1. Role of Regulatory Authorities in detecting Corporate Frauds By – Punit Agrawal (81021919002) BBA-LL.B. 3RD year
  • 2. TABLE OF CONTENTS Introduction Introduction to Frauds Types Types of Fraud FEO Act, 2018 Fugitive Economic Offenders Act, 2018 SFIO Serious Fraud Investigation Office Central Authorities Role of Government Agencies in Combatting Corporate Fraud SEBI Role of Securities and Exchange Board of India in curbing Insider Trading 01 02 03 04 05 06
  • 3. WHAT IS A FRAUD? S/447 CA, 2013 As per this section “Fraud” in relation to affairs of a company or anybody corporate means any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss.
  • 4. TYPES OF COPORATE FRAUDS CORRUPTION Corruption is a form of dishonest or fraudulent conduct by those in power and it typically involves bribery. ASSET MISSAPROPRIATION FRAUD Asset misappropriation fraud involves third parties or employees in an organization who abuse their position to steal assets through fraudulent activity. FINANCIAL STATEMENT FRAUD It can include deliberate falsification of accounting records; omission of transactions– either revenue or expenses, non-disclosure of relevant details from the financial statements OTHER INDICATORS include Delay in finalization of accounts; Frequent changes in accounting policies; Continuing losses; Over drawl of loans and advances; Higher cost per unit of production 01 02 03 04
  • 5. CENTRAL AUTHORITIES Many scams were unearthed during past few years and the enforcement agencies have now become alert and proactive in monitoring instances of Corporate Fraud. To monitor various frauds, a number of anti-corruption legislations have been enacted in India which includes- • Prevention of Corruption Act 1988 (PCA); • The Benami Transactions (Prohibition) Act 1988, • Prevention of Money Laundering Act 2002, • Lokpal and Lok Ayukta Act 2013, • Right to Information Act 2005 (RTI), • Indian Penal Code 1860 (IPC)
  • 6. FUGITIVE ECONOMIC OFFENDERS ACT, 2018 The Act defines ‘fugitive economic offender’ as a person against whom an arrest warrant has been issued by the special court against a scheduled offence who has left India to avoid criminal prosecution or refuses to return India to face criminal prosecution. The Fugitive Economic Offenders Act, 2018 ensures fugitive economic offenders return to India to face the action in accordance with law. This Act also facilitate the functioning of the Prevention of Money Laundering Act, 2002. In Famous Case – • Vijay Vittal Mallya Case- He became the first fugitive economic offender under the new FEO Act, 2018
  • 7. SERIOUS FRAUD INVESTIGATION OFFICE • Section 211 of the Companies Act, 2013 • The Serious Fraud Investigation Office (SFIO) is an Indian statutory corporate fraud investigation authority. • No other investigating agency shall proceed with investigation in a case in respect of any offence under the Act, once the case has been assigned to SFIO. The SFIO has power to arrest individuals if it has reason to believe that he is guilty based on the material in possession. SFIO shall submit a report to the Central Government on conclusion of investigation. Central Government may direct SFIO to initiate prosecution against the company.
  • 8. SEBI • Primary securities market regulator. • Power - The Securities and Exchange Board of India Act which aims for preventing fraudulent practices. • SEBI establishes governance norms for the securities market, ensuring that issuers’ and investors’ interests are protected. • The SEBI corporate governance guidelines are intended to promote a safe, transparent environment for investors while also prohibiting unfair acts such as insider trading. • High-profile frauds - including those involving Harshad Mehta, Ketan Parekh, Satyam (Land), and Nirav Modi Case (PNB)