Sebi readies organisational changes for informant mechanism

New Delhi: Capital market regulator Sebi is planning to effect changes in its organisational set-up for faster delivery of a new mechanism or rewarding whistleblowers and other informants for sharing useful information about insider trading cases.

The Securities and Exchange Board of India (Sebi) recently amended its regulations for the prevention of insider trading by inserting a new informant policy, under which the informants can be rewarded, including with monetary awards, if their leads result in significant disgorgement of money and the information shared by them is useful in the probe.

Sebi has also set up an Office of Informant Protection for this purpose, as under the new framework it is mandatory to disclose the source of information, but confidentiality regarding the identity of the informant would be fully protected.

In a new proposal likely to be discussed by Sebi’s board next week, the regulator has suggested a new clause in its norms about Delegation of Statutory and Financial Powers (DoP), which provides for delegation of powers for carrying out regulatory functions of Sebi, sources said.

Accordingly, powers for approval to require an informant to file the information would be delegated to a DGM, while the communication function would be carried out by an AGM.

Power of approval to declare an informant eligible for a reward and to determine the amount would be with the Executive Direction (Law) upon recommendation of the Informant Incentive Committee.

Power to reject claim for reward as well as the decision to provide information and specifying appropriate assurances of confidentiality would also be with the ED (Law).

The DoP rules allow Sebi to delegate its powers and functions to any member or officer of the regulatory body.

In another proposed change to the DoP rules, the power to approve the structure of fees and other expenses payable to solicitors, advocates, senior advocates, counsels and senior counsels etc would be given to an Empanelment Committee, headed by ED (Law).

This committee would also consist of division chiefs of the legal affairs department, enforcement department and Recovery and Refund Department.

At present, this power is with a committee of division chiefs headed by the senior-most division chief.

The same committee also decides empanelment of advocates and solicitors to appear on behalf of Sebi in various courts, tribunals and other forums.

Earlier also, the CDC used to be headed by ED (Law), but this post was vacant for a temporary period and therefore the committee was being headed by the senior-most division chief.

Now, since the ED (Law) has been posted, it has been proposed that the CDC may be headed by the ED (Law), an official said.