Analysis of the Long-Term Impact of Strengthening the 'Whistleblower' Reward System on China's Capital Market

Now I will present a systematic and comprehensive analysis report. Based on the collected policy information and professional materials, I will conduct an in-depth assessment of the long-term impact of strengthening the ‘Whistleblower’ reward system on China’s capital market.

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On December 30, 2025, the China Securities Regulatory Commission (CSRC) officially issued the “Reward Regulations for ‘Whistleblowers’ Reporting Securities and Futures Violations”, which comprehensively revised and significantly strengthened the original system [1][2]. The main revisions include:

Revision Item	Original Standard	New Standard	Change Magnitude
Reward Ratio	1% of the amount of confiscated fines	3% of the amount of confiscated fines	Increased by 200%
Bonus Cap for General Case Tips	RMB 100,000	RMB 500,000	Increased by 400%
Bonus Cap for High-Impact Cases	RMB 300,000-600,000	RMB 1,000,000	Increased by 67%-233%
Eligibility Threshold for Rewarded Cases	Confiscated fines of RMB 100,000	Confiscated fines of RMB 1,000,000	Increased 10-fold

This revision officially changed the system name from the “Interim Regulations on Reporting Securities and Futures Violations” to the “Reward Regulations for ‘Whistleblowers’ Reporting Securities and Futures Violations”, which reflects three key implications:

1. Conceptual Upgrade
   : Shifting from passive “reporting” to active “whistleblowing”, emphasizing the spirit of “upholding justice” [1]
2. Alignment with International Practices
   : Consistent with the whistleblower system practices of mature markets such as the U.S. SEC [3]
3. Incentive Orientation
   : Highlighting the incentive effect for professional, substantive tips

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According to the CSRC’s 2024 Law Enforcement Overview, information disclosure violations remain the most prevalent type of violation in the capital market:

• Number of Cases
  : 249 information disclosure cases were investigated in 2024, accounting for 34% of the total number of cases, ranking first [4]
• Law Enforcement Intensity
  : 592 penalty decisions were issued throughout the year, a year-on-year increase of 10%; 1,327 individuals (entities) were penalized, a year-on-year increase of 24% [4]
• Referrals to Judicial Authorities
  : 178 cases and clues suspected of criminal offenses were transferred to public security organs, a year-on-year increase of 51% [4]

These data indicate that information disclosure violations are characterized by

, and traditional regulatory models face efficiency bottlenecks.

The ‘Whistleblower’ system is essentially a

, and its role in improving information disclosure quality is achieved through the following pathway:

┌─────────────────────────────────────────────────────────────┐
│                Mechanism for Improving Information          │
│                Disclosure Quality                          │
├─────────────────────────────────────────────────────────────┤
│  Traditional Supervision (on-site inspections, public opinion│
│  monitoring, big data analysis)                            │
│         ↓                                                   │
│  Introduction of the 'Whistleblower' Mechanism            │
│         ↓                                                   │
│  ┌───────┴───────┐                                          │
│  ↓               ↓                                          │
│  Internal Insiders   External Whistleblowers                │
│  (Finance, Legal,   (Suppliers, Customers,                 │
│  Auditing Staff, etc.) Competitors, etc.)                   │
│         ↓               ↓                                  │
│  └───────┬───────┘                                          │
│          ↓                                                  │
│  Mitigates Regulatory Information Asymmetry                 │
│          ↓                                                  │
│  Improves the Probability of Detecting Violations and       │
│  Law Enforcement Efficiency                                 │
│          ↓                                                  │
│  Forms a Compliance Ecosystem of "Dare Not Violate,         │
│  Cannot Violate, Will Not Violate"                          │
└─────────────────────────────────────────────────────────────┘

The new regulation particularly emphasizes incentives for

, with the bonus cap for high-impact cases involving internal whistleblowers raised to RMB 1 million [2]. This design has important strategic significance:

1. Information Advantage
   : Internal insiders have access to first-hand financial data, transaction details, and evidence of violations
2. Cost Advantage
   : Internal whistleblowing reduces the investigation costs and evidence-gathering difficulties for regulatory authorities
3. Deterrence Effect
   : Internal insiders become “mobile monitors”, increasing the risk costs of violations for management

Since its implementation in 2011, the U.S. SEC Whistleblower Reward Program has proven that this mechanism has a significant effect on improving information disclosure quality [3]:

• Tip Contribution
  : Internal whistleblowers account for a significant proportion of the tips received by the SEC
• Case Efficiency
  : Internal whistleblowing significantly improves the conviction efficiency of law enforcement cases
• Compliance Deterrence
  : High rewards form a continuous deterrent to potential violators

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The strengthening of the ‘Whistleblower’ reward system will promote the improvement of listed companies’ compliance levels from the following dimensions:

Impact Dimension	Expected Changes
Emphasis on Internal Control	Listed companies will pay greater attention to improving their internal control systems, particularly in high-risk areas such as financial approval and connected transaction approval [5]
Compliance Resource Allocation	Increase investment in personnel and budget for compliance departments, and strengthen daily compliance reviews
Information Disclosure Quality	Improve the timeliness, accuracy, and completeness of information disclosure, reducing the risk of “failure to disclose required information”
Cultivation of Corporate Culture	Foster an honest and compliant corporate culture, and encourage employees to identify and report violations

1. Risk Early Warning Mechanism
   : Establish a real-time monitoring system for abnormal transactions, connected transactions, and fund flows
2. Information Verification Mechanism
   : Strengthen cross-verification of financial data to reduce the space for financial fraud
3. Third-Party Management
   : Strengthen compliance reviews of third parties such as suppliers and customers, and cut off the chain of collaborative fraud [6]

The new regulation clearly states the principle of “Pursuing Both the Principal Culprit and Accomplices” [6], and holds complicit parties accountable, which will constrain the following entities:

• Intermediaries
  : Accounting firms, law firms, rating agencies, etc. [6]
• Supply Chain Enterprises
  : Suppliers and customers that collaborate in financial fraud
• Internal Responsible Persons
  : The due diligence requirements for directors, supervisors, and senior management are further strengthened [5]

In 2024, the CSRC significantly intensified law enforcement against intermediaries:

• Number of Cases
  : 95 cases of intermediaries failing to perform their duties with due diligence, increasing for three consecutive years, accounting for 13% of the total number of cases [4]
• Practice Prohibition
  : Yongtuo Certified Public Accountants became the first accounting firm prohibited from engaging in securities business since the implementation of the filing system [6]
• Dual Penalty Model
  : The model of penalizing both institutions and individuals was implemented throughout the year, forming a direct deterrent to signing practitioners [6]

The introduction of the ‘Whistleblower’ system will further increase compliance pressure on intermediaries, as internal personnel may become important sources of tips.

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1. Enhanced Information Transparency
   : With the increased probability of detecting violations, listed companies will pay more attention to the quality of information disclosure
2. Strengthened Investor Protection
   : More effective regulation means that investors can obtain more authentic and timely information
3. Enhanced Market Confidence
   : A standardized market environment will attract more long-term capital to enter the market
4. Optimized Resource Allocation
   : High-quality companies will receive better valuations, while inferior companies will be eliminated by the market

Long-Term Impact Timeline (Expected)

2026-2027 (System Run-In Period):
├── Significant increase in the number of tips
├── Regulatory authorities face challenges in handling capacity
└── Listed companies begin to strengthen internal controls

2028-2030 (Effect Emergence Period):
├── Typical violation cases form a deterrent effect
├── Problems caused by internal control defects are exposed in advance
└── Compliance costs shift to compliance investments

Post-2030 (Ecosystem Maturity Period):
├── Systemic improvement in information disclosure quality
├── Improved professional standards of intermediaries
└── The market ecosystem enters a virtuous cycle

A sound market regulatory system helps enhance the international influence of the A-share market:

• Attracts more overseas investors
• Promotes the inclusion of A-shares in international indices
• Enhances the credit endorsement for Chinese enterprises’ overseas financing

1. Authenticity of Tips
   : Malicious and false tips may occur, wasting regulatory resources
2. Risk of Abuse by Insiders
   : Internal personnel may use tips as a means of extortion to seek improper benefits
3. Interference with Normal Business Operations
   : Frequent tips may disrupt the normal business order of enterprises

Although the new regulation clearly stipulates protection mechanisms for ‘whistleblowers’ [1][2], the following issues still need attention in actual implementation:

• Technical Guarantee for Anonymous Management
  : Ensure that the whistleblower’s identity information is not leaked
• Criteria for Identifying Retaliation
  : How to define “disguised retaliation”
• Smooth Relief Channels
  : Channels for whistleblowers to safeguard their rights if their interests are infringed upon

The significant increase in the number of tips poses new challenges to regulatory authorities:

• Screening of tips and priority judgment
• Rational allocation of investigation resources
• Guarantee of case handling efficiency

Regarding the core question raised by users —

, my assessment is:

Impact Factor	Assessment
System Design	★★★★★ (The reward intensity is significantly increased, and the protection mechanism is relatively sound)
International Experience	★★★★☆ (Experience from markets such as the United States proves that this mechanism is effective)
Implementation Support	★★★☆☆ (Regulatory capabilities and the implementation of protection mechanisms remain to be observed)
Market Response	★★★★☆ (Listed companies’ compliance awareness will increase significantly in the short term)
Comprehensive Judgment	Will significantly improve, but requires a 3-5 year system maturity period

: This policy will the information disclosure quality and compliance level of A-share listed companies in the medium to long term, but this effect depends on the improvement of supporting systems and the gradual adaptation of the market. In the short term, there may be a structural contradiction between the surge in the number of tips and the shortage of regulatory resources.

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1. Immediate Actions
   :
   • Review existing internal control systems to identify and remediate potential defects
   • Establish early warning mechanisms for abnormal transactions and connected transactions
   • Improve tip-off channels and encourage internal whistleblowing

2. Mid-to-Long-Term Planning
   :
   • Transform compliance management from a cost center to a value creation center
   • Cultivate an honest and compliant corporate culture
   • Conduct regular compliance training and drills

1. Improvement of Professional Quality
   :
   • Strengthen independence reviews to prevent conflicts of interest
   • Raise professional standards and retain complete audit evidence
   • Establish and improve internal quality control systems

2. Personnel Management
   :
   • Strengthen compliance training and warning education for practitioners
   • Establish a long-term accountability mechanism for professional risks

1. Risk Identification Capability
   :
   • Pay attention to regulatory penalty information and litigation information
   • Identify abnormal financial indicators and connected transactions

2. Rights Protection Awareness
   :
   • Understand investor protection mechanisms and rights protection channels
   • Actively participate in civil compensation lawsuits

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The CSRC’s strengthening of the ‘Whistleblower’ reward system is an important milestone in the modernization of China’s capital market regulation. From the perspective of system design, this regulation aligns with the practices of mature international markets, and both the reward intensity and protection mechanism have reached a relatively high level. From the perspective of long-term impact, this system will promote the improvement of the market ecosystem through the following pathways:

1. Expansion of Supervision Network
   : Form a multi-governance pattern of government regulation, social supervision, and self-discipline
2. Increase in Violation Costs
   : The internal whistleblower mechanism increases the risk exposure of management for violations
3. Strengthening of Compliance Awareness
   : Listed companies will shift from passive compliance to active compliance
4. Improvement of Market Quality
   : The authenticity and timeliness of information disclosure will be systematically improved

It should be noted that the effective operation of this system depends on the improvement of supporting measures, including the enhancement of tip-off handling capabilities, the actual implementation of protection mechanisms, and effective connection with criminal prosecution. It is expected that this system will gradually demonstrate its significant effect on improving information disclosure quality and compliance levels within

.

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[1] Sina Finance - “CSRC Issues the ‘Reward Regulations for Whistleblowers Reporting Securities and Futures Violations’” (https://finance.sina.com.cn/jjxw/2026-01-09/doc-inhftipm5764048.shtml)
[2] China News Service - “China Raises Reward Standards for ‘Whistleblowers’ Reporting Securities and Futures Violations” (https://www.chinanews.com.cn/cj/2026/01-09/10549343.shtml)
[3] DeHeng Law Offices - “2024 Annual Review of the SEC Whistleblower Reward Program” (https://www.dehenglaw.com/wbfiles/ur/upload/image/20250519/6388324806531155358934184.png)
[4] China Securities Regulatory Commission - “Strict Law Enforcement to Safeguard High-Quality Development of the Capital Market — 2024 Law Enforcement Overview of the CSRC” (http://www.csrc.gov.cn/csrc/c100028/c7557781/content.shtml)
[5] AllBright Law Offices - “Administrative-Criminal Connection and Defense Strategies for Cases of Illegal Disclosure or Failure to Disclose Important Information” (https://www.allbrightlaw.com/SH/CN/10475/a07513e9bdf623c4.aspx)
[6] Zhong Yin Law Firm - “2025 Annual Observation on Civil Compensation Cases for Securities Fraud Liability Disputes” (https://www.zhongyinlawyer.com/Home/LibraryDetail?Title=证券欺诈责任纠纷民事赔偿案件2025年度观察)