Although the Serious Fraud Investigation Office (SFIO), set up under the Ministry of Corporate Affairs, has been in existence for over 5 years now, its role has been accentuated owing to the recent turn of events at Satyam Computers. The SFIO has been charged with the task of investigating the fraud at Satyam within a period of three months.
In his article in the latest issue of Frontline, V. Venkatesan (who is also a regular contributor at the Law and Other Things Blog) carries out a detailed analysis of the role and track record of the SFIO. He raises several important questions on both counts. As regards its role, there is no separate legislative framework for the SFIO, which has affected its efficiency. Further, it is one among several other regulators and investigating agencies, including SEBI, the ROC and the CID; multiplicity of regulators (sometimes operating at cross-purposes) almost never produce optimal results. SFIO’s past track record does not inspire much confidence either; Venkatesan details statistics that show the SFIO has not obtained a single court verdict in about 756 cases it has filed, and observes this “is a telling commentary on the constraints it faces”. In the end analysis, the key question is whether such an authority is likely to meet with success in investigating the Satyam fraud. The answer, it would appear, is in the negative.
There is a silver lining, though. The Government’s response to the Satyam episode has been significantly different from previous corporate scandals. This is evident from the lightning speed at which the Government superseded the board of the company that continues to keep the company as well as the hopes of its investors and employees alive. There is a lot at stake here – the entire IT industry, India’s investment climate, and so on. Going by that (and concluding on an eternally optimistic note), one hopes for a different outcome in the fraud investigation as well in Satyam’s case that may perhaps reverse the erstwhile poor track record of the SFIO.
(In his article, Venkatesan has been generous in acknowledging some previous observations made on this Blog)