SEBI Finds Insider Trading In Infosys’ Shares
The Infosys Ltd. headquarters stand in the Electronics City area of Bengaluru, India. (Photographer: Dhiraj Singh/Bloomberg)

SEBI Finds Insider Trading In Infosys’ Shares

The market regulator has found two employees of Infosys Ltd. guilty of violating its insider trading regulations. It has passed interim directions against Venkata Subramaniam, senior principal, corporate accounting group; and Pranshu Bhutra, senior corporate counsel at the company.

Along with these two, six other entities have been barred from capital markets and given 21 days to file objections against the order. The six entities have allegedly made illegal gains of Rs 3.06 crore on the basis of information communicated by Subramaniam and Bhutra, according to Securities and Exchange Board of India.

The regulator, in its ex-parte interim order, has detailed the insider trading activity in Infosys’ shares around July 15, 2020, prior to the announcement of quarterly financial results. The information on Infosys’ financial results was unpublished price-sensitive information between June 29 and July 15, 2020. During this period, entities connected to Bhutra had traded in Infosys’ shares in the F&O segment, the order said.

On June 1, Infosys was informed of an interim ex-parte SEBI order where two of its employees, among other third parties have been named, in an ongoing insider trading investigation. Infosys has a well-defined Code of Conduct covering all its employees and an Insider Trading Policy that governs dealing with unpublished price-sensitive information, a company spokesperson told BloombergQuint in an emailed statement.

"The company will extend full cooperation as required to SEBI on the matter," the spokesperson said. "Additionally, as a result of the order, an internal investigation is being initiated and appropriate action will be taken on conclusion of such investigation."

Trades By Connected Persons

SEBI’s order has noted that Infosys has identified Subramaniam as the designated person for the purpose of unpublished price-sensitive information. Venkata, an insider, was in frequent communication with Bhutra during the UPSI period. On the basis of this and by virtue of being an employee, Bhutra is a connected person and was reasonably expected to have access to the UPSI.

It’s through Bhutra that SEBI has found the information got communicated to:

  • Amit Bhutra who was director on board of Mahrishi Alloys Pvt. along with Pranshu Bhutra’s father Ram Bilas Bhutra. Pranshu and Amit are prima facie connected through the former’s father. Frequent telephonic communication happened between Amit and Pranshu on seven occasions, out of which the longest duration call (297 seconds) was made on July 9, 2020.

  • Capital One which has Bharath Jain and Amit Bhutra as partners. Bharath is a connected person and would’ve had access to UPSI via Amit.

  • Tesora Capital which has Amit Bhutra, Ankush Bhutra and Manish Jain as working partners.

The trades were carried out by Capital One and Tesora in the F&O segment just prior to the announcement of financial results for the quarter ended June 30, 2020. Soon after, they squared off their positions such that net positions were zero. The instructions for the trades were given by Amit Bhutra and Bharath Jain, the regulator has pointed out.

Capital One and Tesora’s trading concentration in Infosys’ shares a week prior to the results announcement was 27.63% and 36.5% respectively. It was almost 0% for both during 2-8 weeks prior to and after the date of corporate announcement of financial results, SEBI’s order has noted.

On the basis of these trades, the regulator has impounded the bank accounts of the six entities to the extent of Rs 3.08 crore. They’ve also been directed not to dispose of or alienate any assets until this amount is deposited in the escrow account.

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