China News -- Chinese financial regulatory authorities plan to improve the whistleblower system and significantly increase the reward for reporting securities and futures violations, up to a maximum of 1 million yuan (RMB, the same below, SGD 180000). Analysis suggests that high rewards can help motivate informed individuals to expose illegal behavior, but the key to the effectiveness of the system still lies in creating a social atmosphere that supports and recognizes whistleblowers.
The China Securities Regulatory Commission and the Ministry of Finance jointly released the "Regulations on Rewarding Whistleblowers for Securities and Futures Illegal Activities (Draft for Comments)" (referred to as the "Whistleblower Reward Regulations") on the evening of Tuesday (September 30th), soliciting public opinions. The deadline is October 30th.
The official statement points out that the "Whistleblower Reward Regulations" are further improved on the basis of the "Interim Provisions on Reporting Illegal and Irregular Acts in Securities and Futures" issued in 2014 and revised in 2020. The revised content includes modifying the system name, improving reward conditions, significantly increasing reward standards, strictly regulating processing requirements, optimizing reward procedures, improving protection mechanisms, and enhancing supervision and accountability mechanisms.
The new regulations will increase the bonus ratio, and the reward amount for reporting will be increased from 1% of the current penalty amount to 3%; For those who provide clues of major illegal activities, the maximum bonus limit has also been increased from 100000 yuan to 500000 yuan; If the provided case clues have significant impact nationwide, or if the amount involved is particularly large, or if the whistleblower is an insider, the maximum bonus for each case will be increased from 300000 yuan and 600000 yuan to 1 million yuan.
The official has also clarified the reporting threshold, and the amount of fines and confiscation for reward cases has been increased from 100000 yuan to 1 million yuan, emphasizing that it is a "major case" that seriously disrupts the order of the securities and futures market, seriously endangers financial security, and seriously infringes on the legitimate rights and interests of investors.
The 21st Century Business Herald quoted analysts as saying that the whistleblower reward is only implemented for major cases, not for all cases, which helps reduce the possibility of individual individuals maliciously reporting in order to obtain rewards.
The authorities have stated that they will continue to strengthen law enforcement efforts for major cases. The China Securities Regulatory Commission handled 739 cases of various types last year, made 592 administrative penalty decisions, and confiscated 15.342 billion yuan, which is 2.4 times that of 2023.
Chen Bo, a senior researcher of the Institute of East Asian Studies of the National University of Singapore, said in an interview with the Lianhe Zaobao that high rewards would attract insiders to report illegal acts. From the perspective of saving the losses of public investors, the upper limit of 1 million yuan of rewards could indeed be raised.
Shen Meng, Executive Director of Xiangsong Capital, told this newspaper that the Chinese financial regulatory authorities hope to guide private forces to participate in supervision by improving the whistleblower system. This has been successful in many developed countries and has played a good role in curbing illegal activities.
However, he also bluntly stated that in the current environment of the Chinese capital market, the effectiveness of institutional incentives still needs to be observed. "Whistleblowers may not necessarily be seen as heroes, and there are very few people within the company who are willing to stand up
Shen Meng noticed that well-known whistleblowing cases in the market, such as Liu Shuwei, a professor at the Central University of Finance and Economics who exposed the fraud of Lantian Corporation, often come from external financial experts rather than internal employees of the company. In addition to increasing the reward amount, it is more crucial to create a social atmosphere that supports and recognizes whistleblowers.
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