Context

In an effort to better tackle the increasing instances of corporate frauds affecting the economy, the Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI) have agreed to begin automatic sharing of data related to companies.

About

More on News

• Memorandum of Understanding (MoU) will facilitate the sharing of data and information between the regulator and the MCA on an automatic and regular basis, while enabling sharing of specific information such as details of suspended companies, delisted firms, shareholding pattern from the SEBI and financial statements filed with the Registrar by corporates, returns of allotment of shares and audit reports relating to corporates.
• The MoU will ensure that both the MCA and the SEBI have seamless linkage for regulatory purposes and in addition to regular exchange of data, the two will also exchange with each other, on request, any available information for scrutiny, inspection, investigation and prosecution.
• A Data Exchange Steering Group has been constituted for the initiative, which will meet periodically to review the data exchange status and take steps to further improve the effectiveness of the data sharing mechanism.
• This assumes significance as the MCA has the database of all registered firms while SEBI only regulates listed entities that may have unlisted subsidiaries, with the MCA having access to all the data of such unlisted entities.
• The MoU marks the beginning of a new era of cooperation and synergy between the two regulators.

Backdrop of frauds

• The MoU comes in the wake of increasing need for surveillance in the context of corporate frauds affecting important sectors of the economy. As the private sector plays an increasingly vital role in economic growth, the need for a robust corporate governance mechanism becomes the need of the hour.
• Incidentally, there is already a protocol of sharing of data between the capital markets regulator Ministry and, in many cases; the regulator has also sent its orders against various entities to the MCA for further action.

The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established in 1988 and given statutory powers in 1992 through the SEBI Act, 1992.