On June 10, 2019, Securities and Exchange Board of India (SEBI) released a discussion paper for informant mechanism related to insider trading. The proposed amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015 will provide absolute confidentiality with appropriate safeguards.
- Capital market regulator announced that genuine whistleblowers could get monetary reward up to Rs 1 crore as well as amnesty from regulatory action.
- Monetary reward for an informant would be subject to certain conditions. It would be in the case where monies disgorged is at least Rs 5 crore.
- It will be paid from the Investor Protection and Education Fund (IPEF). The total amount of the reward will be 10% of the monies collected but it will not exceed Rs 1 crore or such higher amount as may be specified.
- The informant is required to fill a Voluntary Information Disclosure Form (VIDF) which must include credible, complete and original information related to insider trading including those pertaining to Unpublished Price Sensitive Information (UPSI).
- The informant is required to disclose the identity while directly submitting the VIDF. If an informant wishes to submit anonymously, the VIDF must be submitted through a representative who should be a practising advocate.
- It is compulsory for the informant to disclose the source of original information along with an undertaking that the information is not sourced from any person related to SEBI.
- SEBI has suggested to set up Office of Informant Protection (OIP) which will act as a medium of exchange between the informant/ legal representative and the board. Along with this, a hotline shall be maintained by the OIP.
- OIP will look into the policy relating to receipt and registration of VIDF, deciding upon the issue of grant of reward to the informant upon completion of enforcement action and other related matters.
- July 1, 2019 is the last date for submission of public comments on the consultation paper.
About Insider Trading:
It is the trading of a company’s stock or other securities such as bonds or stock options by individuals with the possession of UPSI. Usually, insiders are involved in insider trading through a proxy to whom the relevant information is communicated.
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