New Delhi, Sept. 16 -- The magnitude and impact of corporate frauds have increased as public participation in business financing and corporate growth has grown. About 5% of organizational revenue seeps out annually due to fraud, as estimated. Trust in economic institutions is fundamental to greater capital formation and economic development. Big-ticket frauds involving thousands of crores at regular intervals have hurt investor sentiment and shaken public trust.

Investments in corporate securities-debt and equity-carry risks, and every investor balances the risk-reward ratio. However, under the current framework, fraud risk is not explicitly assessable. Public funds are an easy target for fraudsters. These include funds invested in debt,...