The Serious Frauds Office, to be set up by the government, is likely to assume the role of a lead regulator for the Indian capital markets.
Even the Joint Parliamentary Committee probing last year's stock market scam has recommended that India needs a lead regulator and not a super-regulator as originally proposed.
According to senior government sources, the frauds office will co-ordinate with various regulators and lead investigation into financial offences of large magnitude from the front.
It will comprise officials from regulatory bodies, including the Securities and Exchange Board of India, the Reserve Bank of India, the income tax department, the department of company affairs and the Central Bureau of Investigation.
The JPC, yet to present its final findings on the March 2001 stock scam to Parliament, had initially mooted the idea of a super-regulator.
Former Sebi Chairman D R Mehta had propounded the idea of the capital market regulator being assigned such a role.
After considerable discussion, the JPC has now decided that India needs a lead regulator and not a super-regulator.
JPC sources said the lead regulator would not be one up over other regulators like Sebi and the RBI in terms of powers assigned.
It will, however, play a crucial role in co-ordinating investigations of fraud which falls under more than one regulator's jurisdiction.
Finance Minister Jaswant Singh had announced in July the setting up a Serious Frauds Office along the lines of the Serious Frauds Office in the UK.
Government sources said the office in India would be a multi-disciplinary body and would be broad-based by roping in tax, legal and forensic experts, besides those in the areas of information technology and intellectual property rights.
The office would be set up within the present legal framework, they said. The department of company affairs will, however, in due course examine if separate legislation is required for it.
The office, as the department envisages, will investigate frauds involving not just violation of the Companies Act but also of the rules of other departments and regulatory agencies.
The office will handle about six to eight cases a year. The government will hand over these cases after an inspection has been carried out by some other regulatory agency and only if there are indications that more serious violations had been committed.
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