Infosys CEO Salil Parekh has resolved allegations of insider trading violations, according to India’s market regulator, the Securities and Exchange Board of India, in a statement on Thursday. SEBI said that Parekh has agreed to pay a penalty of Rs 25 lakh (approximately $30,000). The SEBI cited inadequate controls to prevent insider trading as the basis for the settlement.
The High Powered Advisory Committee (HPAC) “recommended the case for settlement upon payment of Rs 25,00,000/-(Rupees Twenty Five Lakh only). The recommendation of the HPAC was accepted by Panel of Whole Time Members of SEBI on May 21, 2024, and the Notice of Demand was issued to the Applicant vide email dated May 24, 2024”, said SEBI.
Infosys Insider Trading Case
The issue involves the July 2020 announcement of a partnership between Infosys and US-based asset manager Vanguard. According to SEBI rules, this agreement should have been treated as unpublished price-sensitive information (UPSI). However, Infosys did not classify it as such.
Significant announcements and business deals are classified as UPSI under SEBI’s Prohibition of Insider Trading (PIT) Regulations. This classification aims to prevent manipulation or misuse of information that could substantially affect stock prices.
In August 2023, SEBI issued a show-cause notice to Infosys, prompting the company to file a consent settlement plea. This mechanism allows the accused to settle the case without admitting guilt by agreeing to pay penalties, face market bans, or both. SEBI’s High Powered Advisory Committee (HPAC) subsequently approved Infosys’s settlement application.
In its application, Infosys outlined its internal practices for identifying UPSI, which were presented to the audit committee and board for guidance and approval. The company has now formalised these practices into a written and approved policy.
“The practice of breaking the total contract value of any deal into average revenue per annum for comparison with the annual revenue of Infosys has also been informed to the Audit Committee and Board of Infosys,” Infosys said in its application.
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