Sebi discussion paper proposes up to Rs 1 crore reward for tip on insider trade

Mumbai: The Securities and Exchange Board of India (Sebi) has floated a discussion paper for informant mechanism related to insider trading to mitigate several challenges faced by the securities regulator.

The regulator said the proposed amendments to the Sebi (Prohibition of Insider Trading) Regulations, 2015 to provide for an informant mechanism will include a voluntary information disclosure form, wherein the informant would submit details of complete information relating to an act of insider trading.

It would be compulsory for the informant to disclose the source of original information, and an independent office separate from the investigation and inspection wings or any of the dealing departments may be established by Sebi.

The confidentiality regarding the identity of the informant and information provided shall be protected through such office and shall be maintained throughout as well as during any proceeding initiated by Sebi except where the evidence of the informant is required during such proceedings.

There may be a reward in case such information leads to a disgorgement of at least Rs 5 crore. Such reward will be 10 per cent of the money collected, but will not exceed Rs 1 crore or such higher amount as may be specified by the regulator, and such reward shall be paid from the Investor Protection and Education Fund (IPEF).

In case the independent office determines that the information submitted is frivolous or vexatious, Sebi may initiate appropriate action against the informant.

Sebi has invited comments on the discussion paper by July 1.