SAT lifts curbs imposed by Sebi in Infosys insider trading case



The Securities Appellate Tribunal (SAT) on Monday lifted restrictions imposed by the Securities and Exchange Board of India (Sebi) in its earlier order pertaining to alleged insider trading by employees of Infosys. 

This comes after some employees of Infosys filed an appeal before the tribunal questioning Sebi’s order of 15 September 2021 confirming the regulator’s 31 May 2021 order that restrained the employees of Infosys                          from buying or selling any securities of Infosys till further orders. 

“When only prima facie observations are being made which the appellant has sufficiently explained and discharged his burden we are of the opinion that at this stage debarring a person from accessing the securities market is not justified in the facts of the case,” said a bench led by Justice Tarun Agarwala while quashing Sebi’s confirmatory order.

“In the absence of any direct or indirect evidence coming forth at this stage and the fact that the investigation is still continuing, which may take time for issuance of a show cause notice, we are of the opinion that the continuation of the interim order against the appellant is unjustified especially when the appellant has not traded in the scrip nor is there any finding that he is a party to unlawful gain,” the tribunal said.

The case pertains to entities and individuals including Pranshu Bhutra, Amit Bhutra, Bharath C. Jain, Capital One Partners, Tesora Capital, and Venkata Subramaniam V. V. Pranshu Bhutra is senior corporate counsel of Infosys and Venkata Subramaniam V. V. is senior principal, corporate accounting group, Infosys.

Capital One and Tesora Capital, two partnership entities, were investigated by Sebi for their trading activity. 

These entities allegedly traded in the futures and options segment of the Infosys scrip right before the announcement of financial results for the quarter ended 30 June 2020.

The information pertaining to the financial results was unpublished price sensitive information (UPSI), and the UPSI period was from 29 June 2020 to 15 July 2020, according to Sebi.

A large part of the case rests on the fact that Subramaniam has been listed as a designated person who can be expected to have reasonable access to the UPSI of the company.  Amit Bhutra and Bharath C. Jain were working partners of Capital One and Amit Bhutra was also a working partner of Tesora.

This prima facie observation coupled with series of phone calls from Pranshu Bhutra to Subramaniam and thereafter from Pranshu Bhutra to his cousin Amit Bhutra, prior to the trades executed by Capital One and Tesora, were bound to give rise to a bonafide suspicion of insider trading based on the sheer preponderance of probabilities caused by chain of connections and activities involving various entities, Sebi noted.

SAT in its order noted that the SD database, which captures details of designated persons having access to UPSI, did not include the name of Pranshu Bhutra or Venkata Subramaniam and therefore they did not have any information pertaining to UPSI.

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