South Korea’s Financial Services Commission (FSC) is set to redesign its whistleblower reward scheme.
Rewards are currently capped at Won3bn ($2.08m) for unfair trading cases and Won1bn for accounting fraud.
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These limits are widely viewed as inadequate, particularly where tips help authorities recover much larger illicit gains.
To change this, the FSC will increase incentives in a bid to draw more insiders to report unfair trading and accounting fraud.
This will include abolishing all caps on whistleblower rewards.
The regulator plans to remove the caps by revising the Enforcement Decrees of the Financial Investment Services and Capital Markets Act and the External Audit Act.
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By GlobalDataThe FSC has also signalled that the current reward formula is difficult to understand and its bracket-based structure can lead to rewards that do not match the size of the recovered funds.
Under the new design, payments will be tied directly to the amount of illicit profits or penalties recouped, with awards of up to 30% available, depending on the whistleblower’s contribution to the case.
The regulator also intends to guarantee a floor for payouts.
The authority will offer a minimum reward that includes Won5m for unfair trading and Won3m for accounting fraud.
To secure stable funding and speed up payments, the FSC is considering a dedicated pool of money for rewards, potentially sourced from penalties collected from offenders.
Additionally, whistleblowers will qualify for rewards no matter which government agency receives the tip first.
At present, only reports made to the FSC, the Financial Supervisory Service, the Korea Exchange or the Korean Institute of Certified Public Accountants can qualify for compensation.
That scope will be widened, and under the revised framework, reports submitted to other authorities including the National Police Agency or the Anti-Corruption and Civil Rights Commission will also qualify for rewards.
To support this, the FSC plans to create an inter-agency body to speed up referrals and information sharing.
It also underlined that legal safeguards will continue to apply, and that whistleblowers will be fully protected from retaliation under applicable laws.
The proposal will be open for public comment from 26 February to 7 April and is expected to take effect as early as the second quarter of this year.
