Capital market regulator Securities and Exchange Board of India (SEBI) is in the process of introducing a reward system for informants providing tips that will help it get back fines from elusive offenders.
The matter was discussed and approved in the regulator's board meeting held on 20 December, according to the minutes of the board meeting. SEBI is yet to officially notify the scheme.
How will this help SEBI and you? Keep reading.
How does SEBI initiate the recovery procedure? Whenever the regulator passes an order against an entity imposing fines or seeking disgorgement of funds, it issues a 'recovery certificate.'
Based on this, SEBI officials begin the recovery process by alerting banks, stock exchanges and depositories.
However, there are several cases where SEBI has issued these recovery certificates but has not been able to collect the fines. This may be due to reasons such as the alleged offender going bankrupt, being untraceable etc.
In some instances, there is a stay order on the recovery issued by various courts. If the stay extends for a long period, SEBI categorises such dues as difficult to recover (DTR), too.
Why now? According to SEBI data, there are 446 cases where defaulters are untraceable, or the companies are not functional or there is a lack of information regarding attachable assets. The value of recovery certificates issued in these cases is nearly Rs 1,939 crore, data showed.
"During execution of recovery proceedings, it was observed in certain cases that the amount remains due for various reasons such as insolvency, stay on recovery of dues, the defaulter being untraceable, etc," The Economic Times quoted the regulator as saying.
How will SEBI pay informants? SEBI wants to pay informants from the Investor Education and Protection Fund (IEPF)- a corpus maintained by the regulator to undertake various activities for investor awareness and protection, according to The Economic Times report.
What is the proposed amount for the reward? Under the proposed scheme, the regulator will reward informants up to Rs 20 lakh per case or 10 percent of dues recovered with the help of the tip, whichever is less, according to the SEBI board meeting minutes.
Additionally, informants will qualify for an interim reward of up to Rs 5 lakh. Also, the regulator has stated that they will maintain confidentiality on the informant's identity.
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