The Securities and Exchange Board of India (Sebi) has initiated a preliminary enquiry against information technology services major Infosys following allegations of unethical practices by a whistleblower.
The market regulator has received the whistleblower’s letter along with voice recordings and emails supporting his claims. “The allegations are serious in nature. A proper enquiry into the matter is needed. We have taken up the matter for a preliminary enquiry,” said a source in Sebi.
The anonymous letter written by an employee group has accused Infosys Chief Executive Officer (CEO) Salil Parekh and Chief Financial Officer (CFO) Nilanjan Roy of indulging in unethical practices. The letter calls for an “immediate investigation” and has accused the top management of changing investment and accounting policies to boost short-term profits.
It also accuses the management of bypassing the board and auditors to escape scrutiny. Infosys’ audit committee has also started consultations with its independent internal auditor, EY, besides appointing law firm Shardul Amarchand Mangaldas for a separate probe into the case. Sebi sources said they would soon direct Infosys to share the probe report. “Our next course of action could depend on the findings of the probe at the company,” said a regulatory official.
The matter could get further complicated for Infosys as the company is also listed on the Nasdaq Stock Exchange in the US. The whistle-blower letter has also been sent to the US Securities and Exchange Commission (SEC).
It is likely that Sebi and the SEC could make use of the International Organization of Securities Commissions’ multilateral memorandum of understanding (MMoU) on cooperation and information sharing. Both Sebi and the SEC are the signatories of the MMoU. “If required, we will seek assistance from the SEC and coordinate with it over the Infosys probe under our MMoU,” said the source.
Shares of Infosys had crashed 16 per cent on Tuesday, eroding over Rs 53,000 crore in market capitalisation. The stock ended with gains of a little over 1 per cent on Wednesday.
The BSE on Wednesday wrote to Infosys, seeking explanation on why the company failed to make disclosures with respect to the whistle-blower complaint.
The stock exchanges were also studying the trading pattern in Infosys over the past one month. “If there are any red flags generated in surveillance, the same will be shared with Sebi. We have to make sure that no individual has made unlawful gains by being in possession of price-sensitive information,” said the source.
This is not the first time Infosys has had tryst with Sebi. Earlier this year, the Bengaluru-based company settled a case pertaining to the severance package paid to former CFO Rajiv Bansal. The company had to pay Rs 34 lakh as settlement fees as the Sebi probe had found that the compensation paid was not in accordance with the company’s remuneration policy.