Troubles seem to have just begun for Bengaluru-based IT major Infosys, with the Centre asking the National Financial Reporting Authority (NFRA) under the Ministry of Corporate Affairs to look into allegations of financial irregularities at the company following complaints by whistleblowers.
An official told CNBC TV18 that the government body will assess if accounting standards were compromised.
However, the NFRA is just one of Infosys’s many problems. Following allegations that CEO Salil Parekh and CFO Nilanjan Roy were indulging in unethical practices, the IT major is now being investigated by India’s markets regulatory body Securities and Exchange Board of India (SEBI) and the United States’ Securities and Exchange Commission (US SEC). The company is also facing a class-action lawsuit in the United States.
“The Company has been in touch with the Securities and Exchange Commission regarding the anonymous whistleblower complaints and has learnt that the SEC has initiated an investigation into this matter," Infosys said in a statement. Infosys shares are traded on American stock exchanges as American Depository Receipts (ADRs).
A few anonymous employees at Infosys accused the CEO Salil Parekh and CFO Nilanjan Roy of unethical practices for many quarters, along with concerns on Parekh's travels to the US and Mumbai. This came into public knowledge after it was first reported by Economic Times on October 21.
"Parekh and Roy have been resorting to unethical practices for many quarters, as evident from their e-mails and voice recordings of their conversations," the complainants said. According to the whistleblowers, Parekh directed the employees to cook account books to show favourable numbers and coerced staffers not to reveal crucial data to board members.
Updating the stock exchanges about the Indian capital markets regulator Securities and Exchange Board of India (SEBI), the Bengaluru-based company said the regulator demanded additional information about the anonymous complaints. Infosys said the additional information will be provided to SEBI.
Rosen Law Firm, a law firm in the United States, filed a lawsuit on behalf of investors of Infosys in a court in New York. According to the Economic Times, the lawsuit demanded trial by a jury for making false and misleading statements, and for not making the appropriate disclosures.
Infosys stated that it is aware of the class-action lawsuit filed against it in a federal court in the US because of the many whistleblowing complaints. “The Company intends to defend itself vigorously in such a lawsuit," Infosys stated.
On Thursday, the company’s stock closed 2.36% lower at Rs 635.40. The company’s shares plunged by 16% on Tuesday, the day following the allegations.
Infosys chairman Nandan Nilekani on Tuesday said that a Board member had received two anonymous complaints on September 30, 2019. One of them was dated on September 20, 2019, and a second one was undated. He added that these complaints were placed before the Audit Committee on October 10, 2019, and before the non-executive members of the Board on October 11, 2019. "...to ensure independence in these investigations the CEO and CFO have been recused from this matter,” he said in a filing with the stock exchanges".
With IANS inputs