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- Securities and Exchange Board of India (SEBI) has released a discussion paper for informant mechanism related to insider trading wherein whistleblowers could get monetary reward of up to Rs 1 crore.
- Insider trading is defined in the SEBI (Prohibition of Insider Trading) Regulations, 2015 to mean trading of securities while in possession of unpublished price sensitive information(UPSI).
- Insiders usually indulge in insider trading through a proxy to whom the relevant information is communicated.Direct evidence of such communication is seldom available,thus detection and prosecution of insider trading remains a challenge.
- SEBI has proposed that entities that come forward with insider trading information will have to disclose the source of information and give an undertaking that such information has not been sourced from any regulator.
- The SEBI has also proposed that if such information leads to a final order by SEBI with a minimum disgorgement of ₹5 crore then a monetary award of 10% of the money collected by SEBI subject to a cap of ₹1 crore can be given to the informant.
- Further,the reward will be paid from the Investor Protection and Education Fund (IPEF).SEBI has also planned to establish an Office of Informant Protection which will be independent of the investigation and inspection wings of the regulatory body.
- 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.
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