Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs 1 lakh on an ex-employee of Infosys for violating the model code of conduct in a case related to shares of Infosys. The individual, Prateek Sarawgi, was working as an Associate Manager (Business Finance) with Infosys during the investigation period.
SEBI had conducted an investigation for period 16 December 2016 to 15 January 2017 in the Infosys scrip to ascertain if market norms, including the Prohibition of Insider Trading (PIT) Regulations, were violated.
It was observed that Prateek Sarawgi was the associate manager (business finance) with Infosys during the investigation period. Infosys had announced financial results for the quarter ended 31 December 2016 on 13 January 2017.
Prateek was in possession of unpublished price sensitive information (UPSI) related to results of Infosys and traded in the scrip during the UPSI period, in violation of market norms.
The SEBI order said that Sarawgi was a designated person of the company when he traded on those shares.
Prateek, while in possession of UPSI relating to results of Infosys for quarter ending (QE) December 2016 had bought 100 shares of Infosys on 12 January 2017 and bought and sold 400 shares and 75 shares of Infosys on 13 January 2017. It is further observed that Prateek’s first order on 13 January 2017 was placed at 09:19 am while the result of Infosys for QE December 2016 was announced on exchanges between 09:04 am to 09:18 am.
Prateek Sarawgi contended that the breach, if any, is unintentional and technical, therefore, no penalty should be imposed on the penalty. He also argued that generally an insider will purchase the shares prior to a positive UPSI and sell immediately on the UPSI becoming public. After the UPSI became public on 13 January 2017 between 09:04 am to 09.18 am, instead of selling shares immediately, he further purchased 400 shares and sold 75 shares.
In his 48 page order, adjudicating officer Prasanta Mahapatra said, “At the outset, I do not find violation of clause 4 of the CoC prescribed under PIT Regulations to be a technical or venial breach. Closing the trading window acts as a mechanism to prevent designated persons from trading who may be in possession of UPSI, thus, by no stretch of imagination, trading during such period can be considered as a technical breach”.
“As per the company’s submission, the trading window was closed from December 16, 2016 to January 15, 2017 with regard to financial result for QE December 2016. Thus, it was observed that the noticee had traded in the scrip of Infosys when the trading window was closed,” as per the order.
Mr Sarawgi was part of the presentation team and responsible for making presentations of the quarter for the audit committee and the board. The market regulator also observed that the presentation had information regarding revenue and cost numbers, which proves that he was an insider who was aware of unpublished price sensitive information.
Prateek Sarawgi, being a designated person of Infosys, made a profit by executing the trades when the trading window of the company was closed.
Further, Prateek Sarawgi, being a designated person of Infosys, by trading in the scrip of Infosys when the trading window was closed also violated model code of conduct for listed companies under the PIT Regulations.