Infosys CEO Salil Parekh Settles Insider Trading Charges with SEBI, Pays Rs 25 Lakh for Inadequate Controls

SEBI's investigation revealed that certain information classified as Unpublished Price Sensitive Information (UPSI) were not appropriately handled by Infosys. The issue arose from a strategic partnership announcement made by Infosys on July 14, 2020, regarding a collaboration with Vanguard, the largest asset manager in the Defined Contribution Space.

Infosys declared that this partnership would involve providing a cloud-based record-keeping platform to Vanguard. SEBI's investigation referred to the Infosys' internal assessment, which recognized the partnership's strategic significance for expanding their business and revenue. This assessment, as per SEBI, should have been classified under Regulation 2(1)(n)(iv) of the SEBI (Prohibition of Insider Trading) Regulations, 2015, as it was material information that could affect Infosys' stock price once made public.

SEBI's order held that Infosys did not adequately classify the information as UPSI. Under Regulation 9A of the SEBI (PIT) Regulations, 2015, CEOs and MDs of listed companies are mandated to establish effective internal controls to prevent insider trading. These controls include maintaining the confidentiality of UPSI and ensuring that it is appropriately identified.

Salil Parekh, as the CEO and MD of Infosys during the relevant period, was found to have violated these provisions. SEBI issued a Show Cause Notice to Parekh on August 3, 2023, requiring him to explain why appropriate actions should not be taken against him for these violations.

In response to the Show Cause Notice, Parekh opted for a settlement approach without admitting or denying the charges. He filed a Settlement Application under the SEBI (Settlement Proceedings) Regulations, 2018. Following discussions with SEBI's Internal Committee, Parekh proposed revised settlement terms, which were later reviewed and recommended by the High Powered Advisory Committee (HPAC).

Measures Taken by Infosys

Infosys revised its practices for identifying UPSI and presented them to the company's Audit Committee and Board for guidance and approval.

Infosys updated its approach to breaking down the Total Contract Value of deals into average annual revenue figures for comparison with the company's overall annual revenue, a practice now formally documented and approved.

Based on these steps, the HPAC recommended the case for settlement upon payment of Rs 25 lakh. This recommendation was accepted by SEBI's Panel of Whole Time Members.

Click Here To Read Settlement Order