Infosys confirms US SEC probe

Mumbai: In a regulatory update, Infosys on Thursday confirmed probe into the whistleblower’s allegations by the Securities and Exchange Board of India (Sebi) and the US Securities Exchange Commission (SEC). The Bengaluru-based IT major also said a class action lawsuit has been filed against it in the US.

Surprisingly, amidst all the trouble, in an apparent move to lift the sagging morale of its employees, the software major announced grant of stock incentives of around 23 lakh shares to around 7,000 thousand mid-level eligible employees.

The Infosys stock remained the whipping boy of the market for the fourth day, closing 2.36 per cent down at Rs 635.40 on the BSE.

Reports said the Sebi has sought additional information from the company, while the National Financial Reporting Authority (NFRA)--which is part of the corporate affairs ministry--has been asked to look into the matter.

Infosys said, “The company has been in touch with the Securities and Exchange Commission regarding the anonymous whistleblower complaints and has learnt that the SEC has initiated an investigation into this matter. The company will cooperate with the SEC’s investigation. Also, Securities and Exchange Board of India has requested additional information from the company concerning the anonymous complaints. The company will provide the information as per Sebi’s request.”

“The company is also aware of a securities class action lawsuit that has been filed against the company in federal court in the United States based on the generalised allegations in the anonymous complaints. The company intends to defend itself vigorously in such a lawsuit,” Infosys said.

On BSE questioning it over late disclosure of whistleblower’s complaints, Infosys said, “Before conclusion of the investigation of the generalised allegations in the complaints, a disclosure under Regulation 30 of LODR Regulations was not required. The disclosure made on October 22, 2019 was to respond to multiple media inquiries and reports.”

“The anonymous whistleblower complaints have been placed before the audit committee who has retained the law firm of Shardul Amarchand Mangaldas & Co. to conduct an independent investigation,” Infosys said.

Makarand Joshi, partner at Mumbai-based MMJC and Associates LLP--a corporate compliance firm--said, "So far, as per the prevalent Sebi LODR Regulations, there are no clauses that makes it mandatory to disclose such information to the stock exchanges, however, as a principle every material information needs to be informed to stock exchange under regulation 30 of Sebi LODR Regulations. However, between the period when the whistleblower complaint was received and the information was made public, if some insider including the whistle blower himself had traded in Infosys share, it will without doubt violate the norms of insider trading."

"Legal liabilities in such cases can be exponential and Infosys has already informed that a securities class action lawsuit that has been filed against the company in the US federal court based on the generalised allegations in the anonymous complaints," Joshi said.