The Securities and Exchange Board of India (SEBI) is considering sweeping reforms to its whistleblower regulations, aiming to inspire confidence among insiders and prevent corporate frauds like the Gensol Engineering scandal. The move seeks to encourage early reporting of misconduct, ensuring scams are stopped before they spiral and serve as a first line of early signs of fraud.
"The reforms follow SEBI’s April 2025 interim order against Gensol, where promoters allegedly diverted 262 crore of loan funds for personal luxuries, exposing critical gaps in India’s corporate governance framework. By strengthening protections and incentives, SEBI hopes to nip such practices in the bud and restore investor trust in the $5 trillion Indian market," said a person close to the development.
The enhanced whistleblower program, likely to roll out by Q3 2025, draws inspiration from the U.S. Securities and Exchange Commission’s (SEC) Dodd-Frank Act, a global benchmark for fraud detection, the person added.
Secure reporting channels will ensure complete anonymity, addressing fears of retaliation that silenced insiders in the Gensol case. A dedicated SEBI whistleblower office is likely to process tips and coordinate with agencies like the Enforcement Directorate (ED) and the Ministry of Corporate Affairs (MCA), while companies intimidating informants will face steep penalties.
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