Question

Demonstrate your understanding of SEBI's regulatory functions by designing the steps SEBI should take to investigate and resolve a suspected case of fraudulent activities by a listed company.

Answer 1

Step 1: Preliminary Investigation: SEBI should initiate a preliminary investigation based on the information received about the suspected fraudulent activities by the listed company. This involves gathering initial evidence, identifying potential violations, and assessing the gravity of the situation.

Step 2: Formal Investigation: Upon finding substantial evidence during the preliminary investigation, SEBI should launch a formal investigation. This involves a deeper examination of the company's activities, including financial records, transactions, and management practices. The investigation may involve summoning company officials, scrutinising books, and seeking expert opinions.

Step 3: Inspection of Books and Records: As part of its regulatory function, SEBI has the authority to inspect the books and records of listed companies to ensure compliance with securities laws. This step involves a detailed examination of the company's financial records and transactions.