Insider trading occurs when someone with access to confidential information about a publicly traded company uses that information to make financial gains (or avoid losses) by trading the company's securities. Insiders include company executives (such as CEOs, CFOs, and board members), employees, and anyone else who has access to material non-public information.
On September 27, 2021, SEBI passed an ad Interim Ex Parte Order against two entities for prima facie violation of the SEBI Act and SEBI (Prohibition of Insider Trading) Regulations, 2015 in the case of alleged insider trading in Infosys. SEBI passed the confirmatory order on December 13. 2021.
SEBI reported that it investigated to ascertain if the two entities violated the SEBI regulations from June 29, 2020, to September 27, 2021. In July 2020, Infosys announced a strategic partnership with Vanguard to provide it with a cloud-based record-keeping platform.
SEBI classifies information about partnerships and major deals as Unpublished Price Sensitive Information (UPSI) as it may have a significant impact on the stock price. However, Infosys did not consider the strategic partnership with Vanguard as USPI despite Infosys’ own analysis identifying the strategic importance of the partnership.
Following the investigation, a show-cause notice was issued to Salil Parekh on August 3, 2023. The Infosys CEO filed a settlement application to settle the case without admitting or denying the findings and conclusions of the probe.
Specifically, Infosys had not appropriately classified certain information as Unpublished Price Sensitive Information (UPSI). As part of the settlement, Salil Parekh agreed to pay ₹25 lakh. The payment was made on June 7, 2024, and SEBI confirmed receipt of the amount.
The settlement was recommended by the High Powered Advisory Committee and accepted by SEBI's Panel of Whole Time Members.
Insider trading refers to the practice of buying or selling a company's securities (such as stocks or bonds) based on non-public information about the company. Some insider trading is legal. For instance, insiders can buy or sell their company's stock if they follow specific rules (such as filing disclosures with regulatory authorities). The illegal form involves trading based on material non-public information. It undermines market integrity and fairness.
Regulatory bodies (such as the Securities and Exchange Commission (SEC) in the United States) monitor and enforce rules against illegal insider trading. Penalties can include fines, imprisonment, and civil lawsuits.
Remember that trading based on inside information is unfair to other investors and damages market confidence. It's essential to maintain transparency and uphold ethical standards in financial markets.
Advertisements