SEBI Said To Start Probe Against Infosys Over Whistleblower Charges
The market regulator has begun its probe into alleged non-disclosure of price-sensitive information by Infosys Ltd.'s management and corporate governance lapses in the wake of allegations levelled by a whistleblower, officials said on the condition of anonymity.
Securities and Exchange Board of India is also examining possible insider trading in the company's securities, they added.
Sources said the regulator has already asked the stock exchanges to collate trading data of Infosys' shares as well as about derivative positions, while details are being sought about alleged non-disclosure of key information.
The regulator may also summon the company's top management and others, while information might be sought from some board committees including those dealing with audit and other financial matters at the company depending on progress in the investigation, the sources added.
The role of independent directors may also come under the scanner in case it is found they did not press for timely disclosure and other necessary actions after receipt of the whistleblower complaint.
Meanwhile, BSE Ltd. on Wednesday asked Infosys to explain why it did not make a disclosure about a whistleblower complaint which alleged that the company's top executives were following "unethical practices" to shore up profits through irregular accounting ways.
On Tuesday, Infosys Chairman Nandan Nilekani said the whistleblower complaint dated Sept. 20 had been placed before the audit committee on Oct. 10. There was an undated complaint which has also been placed before the committee.
One of its board members had received the complaints on Sept. 30, according to Nilekani's statement submitted to the stock exchanges on Tuesday.
Nilekani had said that both the complaints were placed before the company's non-executive board members on Oct. 11, also the day when Infosys announced its second quarter results.
Following reports of whistleblower allegations, the information technology firm, on Monday, informed the stock exchanges that it has received anonymous whistleblower complaints alleging certain unethical practices and that the same have been placed before the audit committee.
Nilekani had also said the audit committee has retained law firm Shardul Amarchand Mangaldas & Co. to conduct an independent investigation into the issue.
In the letter, dated Sept. 20 and signed by 'Ethical Employees', it was alleged that Chief Executive Officer Salil Parikh as well as Chief Financial Officer Nilanjan Roy engaged in forced revenue recognition from large contracts not adhering to accounting standards.
The letter, addressed to the board, claimed that recent big deal wins carried negligible margins and that Roy directed certain people to make wrong assumptions to show margins.