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Markets regulator Markets regulator Sebi and the stock exchanges have started looking into alleged non-disclosure of price-sensitive information by the Infosys management, in the wake of serious allegations levelled by whistleblowers. The regulator is also understood to be examining possible insider trading in the company’s shares.
The Securities and Exchange Board of India (Sebi) has already asked the stock exchanges to collate trading data of Infosys’ shares as well as about huge build-up derivative positions before the complaint was made public, according to officials. It has also sought details about alleged non-disclosure of key information by Infosys.
Explained | The Infosys allegations, and why it matters
“The exchange has sought clarification from Infosys for non-disclosure of the information about the whistleblower complaint,” the BSE said in a statement. “Infosys vide an announcement dated October 22, 2019 submitted statement attributable to Nandan Nilekani, Chairman of Infosys, wherein it is mentioned that Infosys had received whistleblower complaints. However, it is observed that Infosys has not made any disclosures under Regulation 30 of SEBI (LODR) Regulations, 2015, with respect to receipt of whistleblower complaint mentioned in the announcement,” the BSE statement said. When contacted, the Sebi spokesperson was not available for comment.
According to Infosys chairman Nandan Nilekani’s statement, one board member received two anonymous complaints on September 30. One complaint was dated September 20 titled “Disturbing unethical practices” and the second undated with the title “Whistleblower Complaint.”
Nilekani said these complaints were placed before the Audit Committee on October 10 and before the non-executive members of the board on October 11. “However, stock exchanges were not informed about these complaints. The company informed the stock exchange only on October 21 — almost three weeks after the board members received the complaints. When serious corporate governance lapses were brought to the notice of the board, what were independent directors doing,” said an official.
Significantly, after the board meeting of October 11, the Audit Committee began consultation with the independent internal auditors (Ernst & Young) on terms of reference for their prima facie investigation. Stock exchanges were kept in the dark about these developments. “This is price-sensitive information. Such developments should be informed the stock exchanges as per regulations,” said an official. On October 21, the Audit Committee retained the law firm of Shardul Amarchand Mangaldas & Co to conduct an independent investigation.
Infosys shares had plunged over 16 per cent. On Wednesday, its shares rose 1.16 per cent on the BSE. Infosys board had asked CEO Salil Parekh and CFO Nilanjan Roy to recuse themselves from internal investigations into allegations of misgovernance against them. This comes in the wake of the emergence of whistleblower allegations of cover up of costs by the top management to boost revenue numbers. Interestingly, the whistleblowers wrote to the Office of Whistleblower Protection Program, Washington, DC. They avoided approaching Sebi, which regulates the Indian markets where the firm’s shares are traded.
