The Securities and Exchange Board of India has appointed 17 chartered accountant firms to conduct an external audit of transactions undertaken by the Unit Trust of India with 89 companies.
The Sebi move is a fallout of the Tarapore Committee recommendation to the capital market regulator after the UTI scam in 2001.
In reply to a faxed questionnaire, Sebi executives said, "The process (of audits) has been initiated." Sources close to the development said the audit had just started and the auditors would take two to three months to finalise their reports.
The external auditors have been mandated to look into all investments made by the Unit Trust of India in 89 specified companies. These include investments made in the equity and debt instruments of these companies in the primary and in the secondary markets.
The 89 companies have been identified in the joint parliamentary committee reports and have been arranged in blocks of five to six companies.
Each block is being entrusted to a chartered accountant firm. The list of companies includes DSQ Software, Essar Steel, Ispat Industries, Himachal Futuristic and Zee Telefilms.
Prior to this development, the Unit Trust of India had conducted an internal audit of its investments in 18 companies and had submitted the report to the advisory board for commercial banking and financial frauds, headed by SP Talwar, former deputy governor of the Reserve Bank of India.
The Tarapore Committee report to Sebi had called for an external audit of the secondary market transactions made by the Unit Trust of India in these 89 companies, the setting up of institutional mechanisms to keep a regular watch on financial markets and the establishment of a coordinating mechanism between regulators and investigating agencies.
The other measures recommended include the setting up of a serious frauds investigation office as an inter-disciplinary body.
Pursuant to these recommendations, a joint alert system has been constituted in the form of a high-level coordination committee on capital markets, headed by the RBI governor.
Other participants include nominees of Sebi and the Insurance Regulatory and Development Authority. Moreover, the RBI has laid down criteria for keeping a close watch on the financial conglomerates, which are considered too big to fail.
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