MCA may seek quarterly financial reports of cos from Sebi

The Corporate Affairs Ministry may seek quarterly financial statements of companies from market regulator Sebi as part of the exercise to evolve an early warning system to prevent a Satyam-like incident in future.

The quarterly reports filed by listed companies with the Securities and Exchange Board of India (Sebi) can be obtained and scrutinised by the Ministry to find out discrepancies and take appropriate actions, sources said.

Since the disclosure of the Satyam scam, the Ministry of Corporate Affairs has been trying to develop an early warning system so that it can take advance action to prevent large-scale corporate frauds.

Under the current regulations, the listed companies are required to submit annual financial statements with the Registrar of Companies, though they file such statements every quarter with the Sebi.

Besides quarterly financial statements, the Ministry is also looking at the option of seeking information about the IPOs to find out whether the funds raised from the public have been used for purposes declared in the prospectus.

The early warning mechanism, the modalities of which are still being discussed, would help in avoiding corporate frauds, sources said.

Soon after taking charge of his portfolio, Minister of State for Corporate Affairs Minister Salman Khursheed had said the government would put in place a system which would ring alarm bells, in case any discrepancy is noticed.

The issue of corporate governance and its failure came into light after founder of Satyam Computer Services, B Ramalinga Raju, confessed to multi-crore accounting fraud in January this year.

Raju, along with his brother, had cooked the account books of the IT firm for some eight years and showed false profits, which led to soaring of the share prices.

Khursheed had also said though taking Satyam scam to a logical conclusion would be his top priority in his 100-day agenda, avoiding such failures and fiasco in future would be one area where he would like to focus.

There is also the talk of providing for checks and balances in the software MCA 21 itself so that the problems can be nipped in bud itself.