SEBI Introduces Reward System For Informants Sharing Tips On Defaulters

To recover fines from elusive offenders, markets regulator Sebi has introduced a reward system for up to Rs 20 lakh for informants sharing information.

The Securities and Exchange Board of India (SEBI) on Thursday announced a reward system of up to Rs 20 lakh for informants who share information about the assets of defaulters. According to the market regulator, the reward may be granted in two stages, interim and final.

The interim reward amount will not exceed two and a half per cent of the reserve price of the asset regarding which tips was provided or Rs 5 lakh, whichever is less. The final reward amount will not exceed 10 per cent of the dues recovered or Rs 20 lakh, whichever is less. SEBI said that the new guidelines have become effective from March 8. 

The system aims to recover fines from elusive offenders. SEBI said, "Information and the identity provided by the informant or the reward paid to him shall be held in confidence." 

It also added that a person will be considered to be an informant eligible for a reward if he or she furnishes original information in relation to the asset of a defaulter concerning the dues that are certified as 'Difficult to Recover'. Additionally, the market regulator published a list of 515 defaulters on which any informant may have offered information.

The "difficult-to-recover" dues are the ones that could not be recovered even after exhausting all the modes of recovery. According to SEBI's annual report for 2021–22, at the end of March 2022, the market regulator classified debts totaling Rs 67,228 crore as "difficult to recover" (DTR).

For recommending the eligibility of reward, SEBI will set up an informant reward committee comprising the chief general manager of the Recovery and Refund Department, the concerned recovery officer having jurisdiction in the matter, another recovery officer nominated by the chief general manager, and an officer in the grade of deputy general manager or higher, of the Office of Investor Assistance and Education nominated by the chief general manager in charge of Investor Protection and Education Fund (IPEF).

The competent authority shall receive recommendations from the informant reward committee regarding issues relevant to informant eligibility for reward and determination of the amount of reward granted to informants. According to SEBI, the Investor Protection and Education Fund will be used to pay the informant's incentive.