Infosys CEO Salil Parekh has recently settled charges of violating insider trading provisions, agreeing to pay Rs 25 lakh. The Securities and Exchange Board of India (SEBI) announced this decision on Thursday. This settlement highlights the importance of stringent internal controls within major corporations to prevent insider trading.
The High Powered Advisory Committee (HPAC) recommended a settlement for this case upon payment of Rs 25 lakh. This recommendation was subsequently accepted by the SEBI Panel of Whole Time Members on May 21, 2024. SEBI issued a Notice of Demand to Parekh on May 24, 2024, which he responded to by remitting the amount on June 7, 2024, confirming the receipt.
Infosys Share Performance
Following the news of the settlement, Infosys shares saw a slight uptick. The shares were trading 0.30 percent higher at Rs 1,545.95, with a turnover of Rs 10.73 crore. The company commands a market capitalization of Rs 6,41,862.25 crore, reflecting investor confidence despite the regulatory challenges faced.
SEBI's Investigation and Findings
SEBI's investigation covered the period from June 29, 2020, to September 27, 2021. During this time, Infosys was found to have violated provisions of the SEBI Act and the Prohibition of Insider Trading (PIT) Regulations, 2015. The primary issue was the misclassification of certain information as Unpublished Price Sensitive Information (UPSI).
The investigation concluded that Infosys failed to recognize and treat specific strategic partnership details as UPSI. SEBI stated that Parekh proposed to settle the proceedings without admitting or denying the charges, leading to the settlement order and disposal of the specified proceedings.
The Infosys Insider Trading Case
The case centers on Infosys' partnership with Vanguard in 2020. Vanguard, a significant asset manager in the Defined Contribution Space, collaborated with Infosys to provide a cloud-based record-keeping platform. SEBI's investigation highlighted that Infosys identified the strategic importance of this partnership for business expansion and revenue growth. This information was deemed as UPSI under Regulation 2(1)(n)(iv) of the PIT Regulations, 2015.
As per regulatory norms, the CEO and Managing Director are responsible for establishing effective internal controls to prevent insider trading. Due to the lack of adequate controls during this period, a show-cause notice was issued to Infosys. Parekh then sought to resolve the issue through the settlement process, leading to the current resolution.
Inputs by Agencies
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