Infosys Faces SEC Probe, Class-Action Lawsuit In US After Whistleblower Complaint

The Securities and Exchange Commission is investigating the whistleblower complaints against India-based IT company Infosys INFY, Reuters reported.

Infosys is also facing a class-action lawsuit filed by Rosen Law Firm in a New York court on Wednesday, according to the Economic Times.

The law firm has demanded a jury trial alleging that Infosys made false or misleading statements to its investors and failed to disclose the whistleblower allegations on time.

What Happened

The news of the probe comes two days after Infosys Chairman Nandan Nilekani notified New York Stock Exchange and several Indian exchanges that it is investigating allegations of “unethical practices” against its CEO Salil Parekh and CFO Nilanjan Roy.

Anonymous whistleblowers, calling themselves “ethical employees,” suggested that the company CEO bypassed reviews and approvals to show high-profit margins, manipulating the share prices. They further stated that the CFO is compliant, too, and that he does not let the employees bring up vital issues during board presentations.

What’s Next

Apart from the SEC probe and class action lawsuit, Infosys, India's second-largest IT services provider by revenue, is taking a lot of heat locally too.

Indian government’s National Financial Regulatory Authority (NFRA) launched a probe into the accounting irregularities on Thursday, Press Trust of India reported.

The Securities and Exchange Board of India (SEBI) is also looking into both the whistleblower complaints and insider trading allegations against Infosys, according to Indian financial publication Mint.

Price Action

Infosys saw its shares drop by more than 12% on the New York Stock Exchange after Nilekani’s disclosure on Tuesday.