SEBI Announces New Schemes For Providing Tips On Defaulters; Informants May Get Reward Worth 20 Lakhs INR

SEBI, the capital market regulator, has recently introduced a reward system and promised to offer the informants a valuation of up to 20 lakh INR for sharing details about the assets of defaulters. The decision has been aimed at recovering fines from the elusive offenders.

They stated that the reward would be given in two stages: interim and final.

The interim reward would not exceed two and a half percent of the reserved value of the asset about which the details would be shared or 5 lakh INR, whichever option is less, and the final reward would not cross the limit of 10 percent of the dues or 20 lakhs INR, whichever amount is found less.

SEBI has responded, stating that the details and the identity shared by the informant or the rewards given to him will be held in confidence. The decision has come emerged on the provision of rewards to an informant, who provides integral and valid information about the assets of the defaulter.

SEBI has further stated that an individual would be considered an informant if he or she provides original information about the defaulter’s assets, which must be certified to be problematic to recover.

The difficult-to-recover information is the one that could not be secured after using all the modes of recovery.
SEBI has released a list of 515 defaulters, and the informant can provide details on any of them.

SEBI to Establish a Committee for Determining the Eligibility of the Reward:

SEBI will establish an informant reward committee to determine the eligibility of the reward. The committee will comprise the chief general manager of the Recovery and Refund department, the concerned recovery official having knowledge of the matter, another official recommended by the chief general manager, and another officer in the post of deputy general manager or higher role, working in the Office of Investor Assistance and Education. The latter would b nominated by the chief general manager responsible for the Investor Protection and Education Fund.

The authority would be responsible for providing details to the undersigned authority for the eligibility of informants for rewards and the determination of the number of rewards that are to be paid to the informants.
SEBI has declared that the reward would be paid from the Investor Protection and Education Fund. The new guidelines would be operational from March 8. It has been shared by SEBI.

The annual reports sourced from SEBI have shown that the market regulators segregated the dues of 67228 crores INR under the difficult-to-recover category during March 2022.

The step has been taken by SEBI to gather information about the defaulters if their attempts to collect dues do not succeed. They have even mentioned that the informants and the rewards they would receive will be kept anonymous.

In March 2022, SEBI came up with a list of untraceable defaulters. They failed to return the money funded by the investors or fines imposed by the regulatory authority for different offenses committed by them in the manipulation of the Securities Market.

Whenever the regulatory authority has passed an order against a firm imposing fines or looking for funds, it issues a recovery certificate. The SEBI officials move forward with the recovery process by alerting banks, stock exchanges, and depositories based on the recovery certificate. There have been many circumstances where SEBI has published recovery certificates but has failed to gain fines. It could be attributed to reasons, like the offender being bankrupt or being out of reach. In many cases, there are stay orders on recovery issues in different courts. If the period reaches a limit, the authority covers such situation in dues due to DTR.

SEBI has even banned many entities for misutilising the funds of clients. The list includes BRH Wealth Kreators and BRH Commodities. The securities market has imposed penalties accumulating up to 11.5 crores INR. A fine of 10 lakhs INR has been levied on entities like Prosperous Vyapaar, Polo Setco Tie Up, Partcon Commercial, and many others.

Edited by Prakriti Arora