Registrar of Companies gears up to check corporate frauds

The government has said that it will look into the accounts of some companies on the basis of an early warning system it had previously developed, to detect possible corporate frauds

The government today said that it has asked the Registrar of Companies (RoC) to look into accounts of some companies on the basis of alerts put out by an early warning system (EWS), which has been installed to check corporate frauds.

The ministry of corporate affairs (MCA) in September had developed the EWS to detect corporate frauds. The software-based fraud detecting system scans firms based on 10 financial parameters set by the ministry.

“To start with, certain companies have been identified. The RoC has been advised to carry out technical scrutiny of documents filed by these companies to check any irregularity,” corporate affairs minister Salman Khurshid informed Parliament today.

The ministry is also looking at fine-tuning the new Companies Bill, which is pending in Parliament, to firmly deal with financial frauds, he said.

“Identification of companies through the EWS is a continuous process. This system is applicable to all types of companies,” Mr Khurshid said.

On the effectiveness of the system to prevent a Satyam-like fraud which went on undetected for years, Mr Khurshid had earlier said, “Essentially, I put it like a medical test—lipid profile test to tell if your lipid profile is going wrong so that we step in immediately.”

The objective of the EWS would be to develop a permanent system for scanning everybody, he said.

In a related development, the government today said that it is not possible to quantify the amount involved in the Satyam fraud, which came to light in January 2009, till the completion of the CBI inquiry.

“As the investigation by CBI is still in progress, it is not possible to quantify the amount involved in the scam,” Mr Khurshid told the Lok Sabha in a written reply.

“The investigation of the Satyam scam by CBI with regard to diversion of funds from the company is still in progress,” the minister added.


HDFC Bank misleads customers, claims that ULIPs issue is ‘settled’

While the SEBI-IRDA battle over ULIPs is still raging, the bank has emailed its high networth customers a twisted interpretation of an erroneous Times of India report asserting that the ULIP issue is now resolved in favour of IRDA

Even before any hearing has started over whether the capital market regulator or the insurance regulator would regulate unit-linked insurance plans (ULIPs), HDFC Bank has decided that the issue has already been resolved and that all is well with ULIPs.

An HDFC Bank official has shot off an email to high networth clients (serviced under the brand name ‘Imperia’) which quotes a Times of India report saying that “Life insurance companies can do business in equity and bond-linked products, such as unit-linked insurance policies (ULIPs), as per rules laid out by the insurance regulator IRDA, government clarified in Parliament on Tuesday.” HDFC Bank has interpreted this news report as meaning “The statement will put the controversy between SEBI and IRDA on the issue of which agency would regulate the unit-linked products of insurance companies, at rest.”

HDFC Bank’s motivation is understandable. The recent spat between the Insurance Regulatory and Development Authority (IRDA) and market regulator Securities and Exchange Board of India (SEBI) over who would regulate ULIPs has affected the business of large private banks with a nationwide distribution network because they are among the most aggressive sellers of ULIPs.

But the issue is far from settled. The finance minister suggested two weeks ago that the battle over ULIP regulation be fought out in a court between SEBI and IRDA. The court has not even starting hearing the arguments. Indeed, the Times report is quite wrong. The paper wrote: ‘In a written reply to Rajya Sabha, minister of state for finance, Namo Narain Meena said, "The Insurance Regulatory and Development Authority has reported that every life insurance company registered under the IRDA Regulations, 2000, can transact life insurance business, which includes unit-linked business."

Moneylife has a copy of the unstarred question and answer about ULIPs in the Rajya Sabha. This is how it went:
Unstarred Question No. 2618

Launching of Unit linked insurance policies

Will the minister of finance be pleased to state:
(a) Whether Government has any information regarding launching of unit linked (Stock market linked ) insurance policies by the private insurance companies; and
(b) If so, the details thereof?

Minister of State in the Ministry of Finance
(Shri Namo Narain Meena)
(a) & (b): “The Insurance Regulatory and Development Authority (IRDA) has reported that every life insurance company registered under the IRDA (Registration of Indian Insurance Companies) Regulations, 2000, can transact life insurance business which includes 'linked business'. After clearance from IRDA, the insurance companies must launch the products within three months from the date of clearance. The number of new products cleared by IRDA during the financial year 2009-10 in respect of private insurance companies was 236.”

Nowhere in the answer does the minister mention that ULIPs will be regulated by IRDA.

When contacted for clarification, finance ministry and SEBI sources told Moneylife that the claim made in the newspaper article was “completely shocking and preposterous.” After finance minister Pranab Mukherjee asked the two regulators to move court in order to expeditiously resolve the issue, SEBI and IRDA are likely to file a joint appeal before a High Court by 29 April 2010. An email query sent to HDFC Bank remained unanswered till the time of writing this article.



hdfcbank missselling

7 years ago

u can expect simillar stories by so many banks which mr.bhave thought will be mr.clean &issued ban on entryloads LOL

Avinash Murkute

7 years ago

THIS is the way this bank transacts. First they will refuse to take complaint. And if they admit it and whenever any gross irregularity is pointed out, their standard response is - our branch manager has talked to you and issue is resolved.

The above misleading case is one more feather in the cap of this bank. They must remember - not all stories can be PLANTED.

K. Sriram

7 years ago

Post 3 years the bank informing client
we will increase the C.C. Laon if you
do the M.F. busness give to us.

Kumaar L

7 years ago

I once again reiterate my wish that persons who can unduly influence investors decision to vulnerable investors should be banned to sell any financial product.


7 years ago

ulip issue

Ramesh Bhat K

7 years ago

Bankers do the mess
- The Poor Agent is punished.
- It proves that we are in Kalikala

Ramesh Karel

7 years ago

Good Work!!

Siddhesh Kundaikar

7 years ago

Please publish detailed report on claim settlement ratio across all the life insurance companies in India.

Hemant Beniwal

7 years ago

It was expected from the banks but I never imagined that HDFC will be first to do this.

Buyer Beware..

Indian financial industry is seeing some major changes where from guaranteed return products, we are moving in times where returns will be market linked. Here empowering investor is utmost important so that they make the most by understanding products. If an average Indian does not understand how to deal with such changes, he will land up loosing money making lesser money.


7 years ago

It ia not importent whether IRDA or SEBI regulates ULIPs. What is important is that charges are reduced, that the customers are benefitted best

Tapas Chakraborty

7 years ago

This is the way most of the banks in our country run their "distribution business" through their managers having half baked knowledge and passing things off under the guise of "Bankers advice". It is good that someone is at least interested in exposing this

AMCs offer unique incentives to distributors to push sales

Pushed into a corner, AMCs are being forced to come up with unique incentives to boost dwindling sales. Among the goodies—a book on how Google changed the world!

It is now common knowledge that distributors and fund companies have found themselves in a state of disarray, post the entry load ban on mutual funds. With little or no revenues forthcoming through sales of mutual funds, distributors have lost the incentive to push these products. Faced with distributors’ apathy, fund companies are seeking innovative ways to incentivise distributors into selling their products.

DWS Investments, the mutual fund arm of Deutsche Asset Management, in a tie-up with NJ India, was running a unique offer earlier this month. In order to boost the systematic investment plan (SIP) applications, NJ-DWS were offering a free book ‘How Google Changed the World’ for every three SIPs logged by the distributor. This offer, which was only for NJ Fundz Network Partners, was applicable on a minimum application size of Rs1,000 per month (Rs12,000 per year). This offer is trivial compared to what some of the other fund companies are doing.

Religare, for instance, went all out to woo distributors to sell its product, Religare Monthly Income Plan (MIP) Plus. As an ‘early bird incentive’, Religare offered cash emoluments for certain number of applications received before 16th April. For three-nine applications received before that date, distributors were offered Rs75 per application. For applications numbering 10-14, distributors were entitled to Rs1,000; Rs2,000 for 15-19 applications; Rs4,000 for 20-49 applications and Rs10,000 for more than 50 applications.

The same product had another incentive structure in place depending on the volumes gathered by the distributor. For single applications up to Rs99,999, distributors were offered 0.75% as commission. For mobilising applications worth Rs1,00,000-Rs4,99,999, the commission offered was 1%. Distributors mobilising more than Rs5,00,000 for this product, up to Rs1 crore, were given 1.25% commission as incentive.

Moneylife has previously written (see here) about how fund companies are in competition to organise junkets for distributors, hoping to enthuse them to sell their schemes. Unable to pay entry loads to distributors, asset management companies (AMCs) were spending money on flying distributors to exotic Indian and foreign locations.

While organising such extravaganzas for distributors is raising eyebrows, offering innovative incentives is an unavoidable and necessary outcome of the current regime. In the absence of such incentives, the mutual fund industry will virtually come to a standstill.




7 years ago

u should work for incresing penetration rather than sensiting all petty matters

sanjay pandey

7 years ago

in this matter SEBI is main villen,sebi stop all comm. & say-dist. charge fees from investor,but sebi not laid any method they abide 2 investor 4 pay the dist.fees, so, dist.'s have 2 option- quick out from ind.,or do mis-selling. after all distributor is not a social- worker,one time M.F. dist. WAS "HERO OF FIN.MKT." but now he is "ZERO"or "BECHARA".who is responsible 4 it only & only-SEBI.


7 years ago

sebi descision no etry load was wrong double standarad not allowed why insurance co.paid agents in ulips


7 years ago

i find this disgusting. journalists- please understand nothing is free in this world. it was irrational of SEBI to ban the entry load. they did for obvious reasons. finishing IFAs.will they succeed- a BIG NO.

now dont tell me journalists are angels.

Mit Sanghvi

7 years ago

Some AMCs are currently offereing Rs 100 per app on each SIP logged in.


7 years ago

Kudos to our market regulators and retired/super annuated Babus who extinquished the IFAs. The AMCs are thinking out of the box and innovative in wooing/rewarding the exitinct IFAs

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