Sebi to have own forensic lab to check financial frauds

With an aim to catch fraudsters early in their sinister designs, Sebi will soon set up a forensic accounting cell to identify any bungling in the books and regulatory filings of listed firms and market entities.

At the same time, the market watchdog would also seek help from outside professionals, use latest technology software tools and put in place its own 'investigation laboratory' to churn out new investigative methods.

The proposed measures would be a part of Sebi's attempts to keep ahead of corporate and accounting fraudsters, and market manipulators, who are suspected of using newer methods and technologies every passing day to manipulate the rules in the market, a senior Sebi official said.

Having its own forensic accounting cell would help Sebi avoid any recurrence of Satyam-like scams, where irregularities in the company's accounts went unnoticed for many years, he added.

Surveillance of markets is going to be one key area of focus for Sebi in the current fiscal and a proposal has been made to increase the effectiveness of its surveillance mechanism, the official said, adding that the same was discussed at the regulator's last board meeting.

Accordingly, Sebi has decided to "create a forensic accounting cell to improve quality of the financial information disclosed and to assist in detection of financial irregularities so as to serve as an effective early warning mechanism," he added.

Besides, Sebi has also decided to use latest technology software tools, utilise the services offered by professional firms to set up an Investigation Laboratory, which will be used as an incubation room for innovation in investigative methods.

Sebi had earlier in February implemented a new tool for speedy analysis of data and identification of possible violations like insider trading.

The new tool, named Data Ware Housing and Business Intelligence System (DWBIS), will significantly enhance Sebi's investigation and surveillance functions and "generate reports that will better serve Sebi to identify, detect and investigate aberrations and market abuses that undermine market integrity."

This tool would help Sebi monitor the trade and order data received by it in order to identify networked clients who possibly collectively indulge in violations of securities laws. It will have software functions aimed at addressing "crimes like insider trading, front running, etc."

Besides, Sebi is also working to put in place a unified regulatory filing system for all listed companies and market entities in a standardised format.