Securities and Exchange Board of India(SEBI) has approved a detailed set of rules for the new ‘Informant Mechanism’ under its Prohibition of Insider Trading Regulations.
However,these rules would only be available to individuals and corporates.But professionals like auditors will not be able to use this route as they are duty-bound to report any wrongdoing.
Insider trading refers to the practice of purchasing or selling a publicly traded company’s securities while in possession of unpublished price sensitive information(UPSI).
UPSI refers to any and all information that may result in a substantial impact on the decision of an investor regarding whether to buy or sell the security.
The rules defines informant as a person voluntarily submitting a form detailing credible, complete and original information relating to an act of insider trading.
The rules also says that an office of Informant Protection(OIP) shall be established by SEBI for receipt and registration of the Voluntary Information Disclosure Form(VIDF).The confidentiality regarding the identity of the informant and information provided would be protected through the OIP.
The reward would be given in case the information provided leads to a disgorgement of at least 1 crore rupees.The total amount of reward shall be 10% of the money collected but shall not exceed Rs one crore.
The informant will be rewarded from the Investor Protection and Education Fund (‘IPEF’).Further,the informant shall also be exempted from disclosure under the Right to Information Act,2005.