Infosys Insider Trading Case: Sebi Bans 8 Entities, Including 2 Employees of the IT Major; Company To Initiate Internal Probe

New Delhi, June 1: Sebi has barred eight entities, including two employees of Infosys, from the securities market for indulging in insider trading activities in the shares of the IT major. In a statement on Tuesday, Infosys said it will initiate an internal investigation into the insider trading matter. While imposing the ban till further orders on the eight entities, the watchdog also directed impounding illegal gains worth Rs 3.06 crore from two of them -- Capital One Partners and Tesora Capital.

The entities have traded in the scrip of Infosys while in possession of Unpublished Price Sensitive Information (UPSI) pertaining to Infosys'' financial results for the quarter ended June 30, 2020, Sebi said in an interim order passed on Monday. Infosys Engineer in Pune Commits Suicide by Jumping From 12th Floor of High-Rise.

"On June 1, Infosys was informed of an interim ex-parte Sebi order where two of its employees, amongst other third parties have been named, in an ongoing insider trading investigation... The company will extend full cooperation as required to Sebi on the matter," the company said. As a result of the order, an internal investigation is being initiated and appropriate action will be taken on conclusion of such investigation, it added.

Capital One and its working partners -- Amit Bhutra and Bharath C Jain -- as well as Tesora Capital and its working partners -- Amit Bhutra, Ankush Bhutra and Manish Champalal Jain -- have been barred from the securities market. Besides, Pranshu Bhutra, Senior Corporate Counsel of Infosys and Venkata Subramaniam V V, Senior Principal, Corporate Accounting Group of the company, have been barred, as per the order.

Sebi, prima facie, found that Capital One and Tesora had traded in the scrip of Infosys in the F&O (Futures & Options) segment just prior to announcement of financial results for the quarter ended June 30, 2020, and soon after the announcement, they offloaded or squared off their positions such that net positions were zero.

Amit Bhutra and Bharath C Jain had placed orders on behalf of Capital One. In addition, Amit Bhutra, who is also a working partner at Tesora Capital, had given trading instructions on behalf of Tesora. By indulging in such trades, Capital One Partners and Tesora Capital had made illegal gains to the tune of Rs 2.79 crore and Rs 26.82 lakh, respectively, according to Sebi.

While Capital One and Tesora regularly traded in a variety of scrips, during the period from January-October, 2020, it has been observed that the entities had significant trading activity in the scrip of Infosys only during the weeks adjacent/ close to the dates of corporate announcement of financial results for the quarters ended December 2019, March 2020, June 2020 and September 2020.

The trading concentration of Capital One and Tesora Capital in the scrip of Infosys had increased drastically during such time. Thus, the two companies have the same repetitive pattern of trading in the scrip of Infosys during periods close to the announcement of financial results, Sebi noted.

While the matter is still under full examination, it appeared, on preponderance of probability basis, that insider trading may have been carried out, related to other three quarter financial results as well, it added. Sebi noted that Capital One, Tesora Capital, Amit Bhutra, Ankush Bhutra and Manish Champalal Jain had prime facie violated the provision of PIT (Prohibition of Insider Trading) Regulations.

Amit Bhutra is connected with Pranshu Bhutra through frequent telephonic communication. Also, it has been noted that Subramaniam and Pranshu Bhutra, continue to be employed with Infosys and have access to ongoing UPSIs, Sebi said in the 55-page order. By virtue of being a designated person, Subramaniam was reasonably expected to have access to and be in possession of UPSIs.

On a preponderance of probability basis, Subramaniam had communicated the UPSI to Pranshu Bhutra and Pranshu Bhutra had procured UPSI from Subramaniam. Thereby, both had prime facie violated the provision of insider trading norms, the order noted.

Accordingly, all the eight entities have been restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders.

The order comes after Securities and Exchange Board of India (Sebi) alert system had generated insider trading alerts for the scrip of Infosys for the period around July 15, 2020 i.e. around the corporate announcement of audited financial results of the company for the quarter ended June 30, 2020. Thereafter, based on the alert, Sebi had conducted a preliminary examination in the scrip of Infosys to ascertain whether certain entities had violated the regulatory provisions.