SEBI Plans to Reward Informants up to Rs.5 lakh for Tips to track down evasive offenders and collect fines

The Securities and Exchange Board of India (SEBI) is in the process of implementing a reward system for informants who provide information that enables it to track down evasive offenders and collect fines from them.

According to the meeting minutes, the matter was discussed and approved at the regulator’s board meeting on December 20. The scheme has yet to be officially announced by Sebi.

The board meeting minutes also revealed that the regulator intends to compensate informants under the programme up to Rs.20 lakh per case or 10% of the amount of debt recovered, whichever is less.

Additionally, the informants will be eligible for a Rs.5 lakh interim reward. According to the report, Sebi will also maintain the confidentiality of the informants’ identities.

“During the execution of recovery proceedings, it was observed in some cases that the amount remains due for various reasons, such as insolvency, stay on recovery of dues, the defaulter being untraceable, etc.,” stated Sebi. The aforementioned policy “enables certification of certain matters as DTR (difficult to recover) where dues could not be recovered even after exhausting all the possible steps for recovery.”

As per data from Sebi, there are 446 cases in which the defaulters cannot be found, the businesses are shut down, or there is insufficient information about attachable assets. In addition, the recovery certificates issued in these cases are estimated to be worth Rs. 1,939 crore.

Sebi issues a “recovery certificate” for each order it makes against a party seeking to recoup funds or impose fines. According to the report, Sebi officials inform banks, stock exchanges, and depositories to begin the recovery process based on this. In several cases where it was unable to collect the penalty, it nonetheless issued these recovery certificates. This might be the case if the alleged offender goes missing or files for bankruptcy. Different courts have occasionally issued a stay order on the recovery. Sebi also classifies these fees as DTR if the stay is prolonged significantly.

The regulator is attempting to compensate these informants out of the Investor Education and Protection Fund (IEPF), which Sebi administers in order to carry out various investor protection and awareness-raising initiatives.