Insider Trading Cases: SEBI Comes Out With New Informant Mechanism To Reward Whistleblowers
SEBI building exterior. (Photographer: Sajeet Manghat/ BloombergQuint)

Insider Trading Cases: SEBI Comes Out With New Informant Mechanism To Reward Whistleblowers

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The Securities and Exchange Board of India on Tuesday came out with a new mechanism to reward whistleblowers and other informants for sharing information about insider trading cases.

Under the new framework, it would be mandatory to disclose the source of information, besides, confidentiality regarding the identity of the informant would be protected, the regulator said in a statement.

Insider trading refers to trading of securities while in possession of Unpublished Price Sensitive Information about the particular securities.

SEBI said,"reward would be given in case the information provided leads to a disgorgement of at least Rs 1 crore in accordance with the PIT (Prohibition of Insider Trading) Regulations".

The regulator said that Office of Informant Protection has been established by it as an independent office for receiving and processing Voluntarily Information Disclosure Form.

The OIP would serve as a medium of exchange between the informant or legal representative and the regulator.

According to SEBI, an informant would have to voluntarily submit original information pertaining to any violation of insider trading laws to the OIP, through a VID form. The information would have to be submitted by the informant directly in which case his identity would be required to be revealed at the time of submission of the VID form.

In case, the information is submitted through a legal representative, the identity of the informant is not required to be revealed at the time of submission of VID form. However, the identity of the informant would be required to be revealed prior to payment of reward, if any, it added.

"Every person required to have a code of conduct under PIT regulations shall ensure that such a code of conduct provides for suitable protection against any discharge, termination, demotion, suspension, threats, harassment, directly or indirectly or discrimination against any employee who files a VID Form," SEBI noted.

The PIT Regulations were amended in September by inserting a new chapter dealing with informant policy in relation to insider trading laws. The new amendments will come into force with effect from Dec. 26.

SEBI said that VID Forms will be available on its website from Dec. 26.

Earlier in June, the regulator came out with this proposal in order to curb insider trading and had sought comments from public on the same.

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