SEBI may come under CAG review soon

The performance of Security and Exchange Board of India (Sebi) and other regulators such as Insurance Regulatory Development Authority (IRDA) may soon be put under scrutiny of the Comptroller and Auditor General (CAG) for their failure to detect irregularities in corporate governance such as the one discovered in Satyam Computers. After the lid was blown off the Satyam scam, the CAG sent a strongly-worded letter to the finance ministry stating that SEBI and IRDA had failed to put their funds under government accounts despite instructions issued by the government to do so. SEBI has been maintaining a fund balance of Rs 707 crore as of March 2007 outside the government accounts. “Though the funds are public money collected by the regulator as fees and other charges in the form of penalties and turnover fees, they have been kept outside the government accounts to prevent any critical appraisal of its performance and audit of its expenditure,” sources said. The finance ministry had as early as 2005 instructed all government bodies and regulators to ensure that their funds were maintained in the Public Accounts. The orders were issued with a view to achieve fiscal objectives set out under the Fiscal Responsibility and Budget Management (FRBM) Rules. The CAG, in its latest communication to the government, is believed to have said that the refusal by regulators to bring their funds under government accounts was not only violative of government instructions but also inconsistent with constitutional provisions. The finance ministry had in its draft action taken note to the Public Accounts Committee in November 2004 also assured the panel that regulators had been asked to deposit its funds in the Public Accounts, sources said. However, despite all such instructions and assurances made by the government, Sebi, like IRDA, has been maintaining its funds running into hundreds of crores outside the government accounts. Demanding that regulators holding public money be subjected to performance review by the government auditor, the CAG, in its report submitted before Parliament in October 2008, had said, "SEBI was established by an Act of Parliament in 1992 and is to be treated as `state' within the meaning of the expression used in Article 12 of the Constitution. The money collected by SEBI must, therefore, be credited to the government account." – www.economictimes.indiatimes.com