Infosys Technologies office campus in Bangalore. Photo: AFP
The Infosys Technologies campus in Bangalore. Photo: AFP

The recent storm kicked up by a group of whistleblowers alleging ‘unethical practices’ by Infosys CEO Salil Parekh and CFO Nilanjan Roy is taking a heavy toll on the group.

Its stock got hammered in the markets and it has now come under the scrutiny of various regulatory agencies. The latest to launch an investigation is the US Securities and Exchange Commission.

The Bangalore-based IT services giant, which is also listed on New York Stock Exchange, said it has been in touch with the Commission and will cooperate with its investigation.

Infosys also disclosed that a securities class action lawsuit has been filed against it in a US Federal Court based on the complaints – and it intends to contest the claims.

In India, stock market regulator, the Securities and Exchange Board of India, has sought additional information from Infosys about the complaints, and the company has agreed to provide the information as per the request.

The Indian regulator sought an explanation from Infosys on Wednesday as to why it didn’t inform them about the whistleblower complaints as soon as they were made.

The company replied that its audit committee was reviewing the complaints and a disclosure to the market regulator was not required before the investigation was concluded.

Unusual trade in derivatives, put options

The regulator is also probing an unusual build-up of derivative positions in Infosys before the whistleblowers’ letter alleging unethical practices surfaced last week, the Economic Times reported, quoting sources.

It will examine whether people with prior knowledge of the matter looked to profit from a fall in the share price following the accusations.

Even before the letter became public, there was increased activity in Infosys put options, which raised eyebrows in the market. A buyer of put options is usually betting that the stock or index will fall.

This activity took place from mid-September to first week of October and it continued even while the company posted strong earning in at the end of September. After the allegations became public Infosys shares tumbled about 14% over the past weekend.

Infosys said on Tuesday that it was investigating claims that Parekh bypassed reviews and approvals for large deals, because he feared a negative impact of reduced profits on Infosys’ share price. It said it was also probing whether Roy had prevented employees from highlighting issues in regard to large deals in presentations to the board.

Many current and former senior executives of Infosys are convinced that the board, headed by non-executive chairman Nandan Nilekani, will not hesitate to replace Parekh if the evidence claimed by the whistleblowers substantiates the allegations, has reported.

Meanwhile Jayesh Sanghrajka, who resigned earlier this month as deputy chief financial officer of Infosys, is reportedly in talks to join Mphasis, Economic Times reports.

After the whistleblowers’ allegations came to light, analysts began questioning the timing of Sanghrajka’s departure.

Also read: Infosys accused of account manipulation

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