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Serious Fraud Investigation Office (SFIO) : Notes For Upsc: Why Was The SFIO Setup?

The Serious Fraud Investigation Office (SFIO) is an agency established to investigate complex corporate fraud cases. [SFIO] investigates fraud related to companies under the Companies Act and coordinates with other agencies like the Income Tax Department and CBI. [SFIO] was set up in 2003 based on recommendations to address stock market scams and failures of companies that caused major financial losses. [SFIO] has powers to investigate fraud cases involving public interest, systems improvements, or that are multi-disciplinary in nature and can make arrests with appropriate approvals.

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278 views2 pages

Serious Fraud Investigation Office (SFIO) : Notes For Upsc: Why Was The SFIO Setup?

The Serious Fraud Investigation Office (SFIO) is an agency established to investigate complex corporate fraud cases. [SFIO] investigates fraud related to companies under the Companies Act and coordinates with other agencies like the Income Tax Department and CBI. [SFIO] was set up in 2003 based on recommendations to address stock market scams and failures of companies that caused major financial losses. [SFIO] has powers to investigate fraud cases involving public interest, systems improvements, or that are multi-disciplinary in nature and can make arrests with appropriate approvals.

Uploaded by

Mehul Saxena
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Serious Fraud Investigation Office (SFIO): Notes for

UPSC
Serious Fraud Investigation Office (SFIO) is a fraud-investigating agency set up to investigate
corporate frauds of very serious and complex nature. The authorisation of SFIO is limited to
investigating frauds related to a company under the Companies Act. The investigation done by
SFIO is considered separate from other normal investigations 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 (CBI) for fraud investigation.

Why was the SFIO 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.

The Vajpayee Government decided to set up SFIO on 9 January 2003, 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 a huge financial loss to the public.

Powers of SFIO

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

● Complexity, having inter-departmental and multi-disciplinary repercussions.


● Significant involvement of public interest to be judged by size, either in terms of
monetary malpractice or in terms of the persons affected.
● The potential of investigations leading to, or assisting towards, a clear improvement in
systems, laws or procedures.

Process

● SFIO starts an investigation only after receiving an order from the Union government in
this respect which means it cannot take up cases on their own initiative.
● Once a 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 commence the investigation in such cases. In case any such
investigation has already been initiated, it cannot be proceeded further with, and the
concerned agency has to transfer the relevant documents and records in respect of such
offences to the Serious Fraud Investigation Office.

Can SFIO make arrests?

● The Serious Fraud Investigation Office (SFIO) has the power to arrest people who
violate the company’s law.
● The director, as well as additional or assistant director level officials at the SFIO, have
the authority to arrest a person if they believe that the person guilty of any offence with
regard to the case being probed, provided there is a written complaint of the offence.
● The responsible authority for all the decisions relating to the arrest is the Director of
SFIO.
● If a person is caught in connection with the government or foreign company under
investigation, it is important that prior approval of the central Government is provided to
the SFIO.

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