Announces Rs 1 crore reward hotline access for informers of insider trading

first_imgMumbai: With an aim to uncover insider trading cases, regulator Sebi on Wednesday announced a new mechanism to reward informants with up to Rs 1 crore cash for any credible inside information through a specially created hotline and also proposed a possible amnesty or settlement for minor wrongdoings in return for cooperation in the probe. At a meeting held here, Sebi’s board approved a detailed set of rules for the new ‘Informant Mechanism’ under its Prohibition of Insider Trading (PIT) Regulations. Also Read – Thermal coal import may surpass 200 MT this fiscalHowever, these benefits would only be available to individuals and corporates, and professionals like auditors will not be able to use this route as they are duty-bound to report any wrongdoing. The Sebi regulation seeks to curb insider trading to protect the interest of investors at large and defines ‘insider trading’ as trading of securities while in possession of unpublished price-sensitive information. The insider trading is mainly carried out in a clandestine manner and the wrongdoers typically use proxies for communicating the relevant information and for executing the trades. Also Read – Food grain output seen at 140.57 mt in current fiscal on monsoon boostAs any direct evidence of such communication is seldom available easily, the detection and prosecution of insider trading remains a challenge. Officials said it is imperative for Sebi to employ all legitimate means to detect insider trading and initiate action at the earliest to instill confidence among investors and ensure integrity of the market. But, Sebi faces several challenges in establishing links and procuring proof while probing insider trading cases, due to which investigation into such cases takes much longer time than in other cases of market manipulation. To strengthen its investigation and enforcement mechanism, the new mechanism will incentivise people having personal knowledge of insider trading cases and report the same to the watchdog. The new mechanism has been prepared after taking into account the feedback Sebi received on a public discussion paper floated in June. Under the proposed amendment to Sebi’s PIT Regulations, an informant would need to submit a Voluntary Information Disclosure Form (VIDF) detailing credible, complete and original information related to an act of insider trading, including communication of unpublished price-sensitive information or trading in violation of rules that has occurred, is occurring or is about to occur. It would be mandatory to disclose the source of information and attach an undertaking that it has not been sourced from a person employed with Sebi or any related regulator.last_img