To mitigate several challenges faced by the securities regulator, the market regulator Securities and Exchange Board of India (SEBI), has floated a discussion paper for the informant mechanism related to insider trading, wherein whistleblowers would get the monetary reward of up to Rs 1 crore.
It is desirable that SEBI considers instituting a process that enables timely reporting of instances of insider trading violations and also, provides for the grant of reward with adequate checks and balances that could incentivize timely reporting of information, according to a consultation paper.
“The proposed amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015 will provide near-absolute confidentiality along with appropriate safeguards, and would also help in strengthening the mechanism for early detection of insider trading and better enforceability,” according to the regulator.
The mechanism will include a dedicated reporting window, voluntary information disclosure form, wherein the informant would submit details of credible, complete and original information relating to an act of insider trading, including communication of unpublished price sensitive information or trading in violation of the code of conduct.
“The total amount of monetary reward shall be 10% of the monies collected but shall not exceed Rs 1 crore or such higher amount as may be specified. An interim reward not exceeding Rs 10 lakhs may be given at the stage of issuance of the final order by the SEBI against the person directed to disgorge. The final reward, after adjusting the interim reward, shall be issued after collection or recovery of the monies disgorged equal at least twice the final reward,” SEBI said.
The reward would be paid from the Investor Protection and Education Fund (IPEF).