Salil Parekh agrees to pay ₹25 lakh for failing to have adequate controls to prevent insider trading

Bengaluru: Infosys CEO Salil Parekh during the press conference (Photo: IANS)

India’s second largest IT services company Infosys’ CEO Salil Parekh has agreed to pay ₹25 lakh to settle the charges of violating provisions of insider trading, the Securities and Exchange Board of India (SEBI) said on June 26.

SEBI conducted an investigation to ascertain whether any acts of Infosys during the period from June 29, 2020 to September 27, 2021 were in violation of the provisions of the SEBI Act and PIT Regulations, 2015.

“During the course of investigation, it was found that certain information which was Unpublished Price Sensitive Information (UPSI) had not been considered as such by Infosys,” the market’s regulator said in its statement.

The regulator pointed out that on July 14, 2020, Infosys had announced a strategic partnership with Vanguard. As per the announcement, Vanguard was the largest asset manager in the Defined Contribution Space and Infosys would provide a cloud-based record keeping platform to Vanguard.

The investigation by SEBI identified the strategic importance of the partnership for the expansion of their own business and revenue; and concluded that the said partnership would result in expansion of business for Infosys.

“The investigation concludes that the information related to the strategic partnership was covered under Regulation 2(1)(n)(iv) of the definition of UPSI under the PIT Regulations, 2015,” the regulator said.

It must be noted that UPSI means “unpublished price sensitive information” which implies any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to financial results, dividends, change in capital structure, mergers, de-mergers, acquisitions, delistings, disposals and expansion of business and such other transactions, and changes in key managerial personnel.

SEBI explained that in such a case, MD or such other analogous person of a listed company is responsible for putting in place an adequate and effective system of internal control to ensure compliance for preventing insider trading.

Salil Parekh was the CEO and MD of Infosys at the time of announcement of strategic partnership between Infosys and Vanguard, and therefore was found in violation of the aforementioned provisions.