The Security and Exchange Board of India (SEBI) issued interim orders for two employees of Infosys Limited and six other entities in the matter of Insider Trading, which shall be in force until further orders.
The SEBI alert system had generated insider trading alerts for the scrip of Infosys Limited for the period around July15, 2020 i.e. around the corporate announcement of audited financial results of Infosys. The quarter ended June30, 2020 made at BSE and NSE
Thereafter, based on the aforesaid alert, SEBI conducted a preliminary examination in the scrip ofInfosys to ascertain whether certain persons/entitiestraded in the said scrip while they were in possession ofunpublished price sensitive information incontravention of the provisions of the Securities andExchange Board of India Act, 1992 read with the SEBI (Prohibition of Insider Trading) Regulations, 2015 “PITRegulations”
According to the Market regulator examination the Prima Facie evidence of Insider trading was observed-
The corporate announcement of audited financial resultsfor the quarter ended June 30, 2020 was made byInfosys to BSE and NSE on July 15, 2020.Theinformation relating to the financial results of Infosys including basic financial parameters of profit & loss(P&L) and balance sheet as well as key financial andoperational parameters which contribute to variouselements of the P&L and BS for the quarter ending June30, 2020 was Price Sensitive Information which came into existence on June 29 2020.Thus, the UPSI period was from June 29, 2020 to July 15, 2020.
Mr. Pranshu Bhutra Senior Corporate Counsel of Infosys, being an officer / employee of Infosys is a connected person and was reasonably expected to have access to the UPSI and on preponderance of probability basis he was in possession of the UPSI. Thus, Pranshu Bhutra is an insider and violated the provision of Section 12A (e) of SEBI Act, 1992 and Regulation 3(1) of PIT Regulations
Section 12A of SEBI ACT 1992 – Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control.—No person shall directly or indirectly
(e) deal in securities while in possession of material or non-public information or communicate such material or non-public information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made there under;
Regulation 3(1) of PIT Regulations 2015- No insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.
Mr. Venkata Subramanian V. V, Senior Principal, Corporate Accounting Group of Infosys has been identified as a Designated Person by Infosys for the purpose of the UPSI. By virtue of being a Designated Person, Venkata was reasonably expected to have an access to and be in possession of the UPSI. Thus, Venkata Subramanian is an insider and violated the provision of Section 12A (e) of SEBI Act, 1992 and Regulations 3(2) of PIT Regulations.
Section 12A of SEBI ACT 1992 – Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control.—No person shall directly or indirectly
(e) deal in securities while in possession of material or non-public information or communicate such material or non-public information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made there under;
Regulation 3(2) of PIT Regulations 2015No person shall procure from or cause the communication by any insider of unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.
As per Regulation 2(1)(n) of PIT Regulations, “Unpublished Price Sensitive Information” means any information which relates directly or indirectly to a Company and which is not generally available and which upon becoming generally available, is likely to materially affect the price of securities of Company. The information relating to financial results of a Company is likely to materially affect the price of securities of the Company upon becoming generally available.
According to the order of SEBI, the prima facie observations were made by the market regulator for other entities involved in this Insider trading-
Mr. Amit Bhutra is connected with Pranshu (an insider) (a) through frequent telephonic communication; (b) Pranshu had a fund transaction with Mahrishi Alloys Private Limited (Mahrishi) and soon thereafter Mahrishihad fund transaction with Shyama Devi Bhutra (Mother of Amit) and (c) Ram Bilas Bhutra (Father of Pranshu) and Amit are both directors in the Board of Mahrishi. Thus, Amit is a connected person and is reasonably expected to have an access to the UPSI and therefore, he is an insider and on preponderance of probability basis was in possession of the UPSI procured from Pranshu.
Mr. Bharath C. Jain and Amit are partners of Capital One Partners. Amit and Bharath are connected through (a) professional relationship and (b) frequent telephonic communication. Thus, Bharath is a connected person and is reasonably expected to have access to the UPSI through Amit and on preponderance of probability basis he was in possession of the UPSI. Hence, Bharath had procured UPSI from Amit and was in possession of the UPSI. Thus, Bharath is an insider.
As per the partnership deed of Capital One Partners Amit and Bharath are working partners of Capital One.
As per the partnership deed of Tesora Capital, Amit, Ankush Bhutra and Manish Champalal Jain are working partners of Tesora.
Order by Market Regulator-
a) Mr. Pranshu Bhutra, Mr. Amit Bhutra, Mr. BharathC Jain, Capital One Partner, Tesora Capital and Mr. Venkata Subramaniam V. V are restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders.
b) Mr. Manish C Jain and Mr. Ankush Bhutra are restrained from buying, selling or dealing in securities, either directly or indirectly.
c) The bank accounts of Capital One Partners, Mr. Amit Bhutra and Mr. Bharath C Jain to the extent of amount is impounded. Further, Capital One Partners, Mr. Amit Bhutra and Mr. Bharath C Jain are directed to open an escrow account with a nationalized bank, jointly and severally and deposit the impounded amount mentioned.
d) The bank accounts of Tesora Capital, Mr. AmitBhutra, Mr. Manish C Jain and Mr. Ankush Bhutrato the extent of amount is impounded. Further, Tesora Capital, Mr. Amit Bhutra, Mr. Manish C Jain and Mr. Ankush Bhutra are directed to open an escrow account with a nationalized bank, jointly and severally and deposit the impounded amount mentioned.
e) Mr. Amit Bhutra, Mr. Bharath C Jain, Capital One Partner, Tesora Capital, Mr. Manish C Jain and Mr. Ankush Bhutra are directed not to dispose of or alienate any assets, whether movable or immovable, or any interest or investment or charge on any of such assets held in their name, jointly or severally, including money lying in bank accounts except with the prior permission of SEBI until the impounded amount is deposited in the escrow account.
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f) Mr. Amit Bhutra, Mr. Bharath C Jain, Capital One Partner, Tesora Capital, Mr. Manish C Jain and Mr. Ankush Bhutra are directed to provide a full inventory of all assets held in their name,
g) The Depositories are directed to ensure, that till further directions, no credits and debits are made in the demat accounts, held individually or jointly.
h) The Registrar and Transfer Agents are also directed to ensure that till further directions, no credits are permitted.
The Board has granted 21 days from the date of receipt of this Order to file reply/objections, if any.
Source:ILNS