In a bid to incentivize whistleblowers, The Securities Exchange Board of India (SEBI) has decided to increase the maximum reward for information related to insider trading from ₹1 crore to ₹10 crore.
The market regulator has been trying to streamline the whistle-blower mechanism for few years. In 2019, it had raised the reward to ₹1 crore, but with a caveat that if the information submitted is frivolous or vexatious, it can lead to appropriate punitive action against the informant.
The actual quantum of reward will be decided on a case-to-case basis. If the total reward payable is more than ₹1 crore, then an interim reward of up to ₹1 crore may be granted by SEBI, after the final order is issued. The remaining reward amount will be granted only upon receipt of the monetary sanctions amounting to at least twice the balance of the reward amount payable by SEBI.
The SEBI mandates that every listed company should have a whistle-blower policy and make employees aware of such policy as also reward the informants for coming forward. The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 require listed companies to devise an effective whistleblowing policy.
A whistleblower is considered as any individual who makes a non-speculative fact-based disclosure in writing and in good faith, about an unethical or improper activity with respect to the Company. The purpose of a good whistleblower policy must be to encourage stakeholders to report matters without fear of retaliation, victimization, discrimination, or disadvantage.