Indian IT services major Infosys on Thursday said that the U.S. Securities and Exchange Commission (SEC) has initiated an investigation into anonymous whistle-blower complaints of alleged ‘unethical practices’ used by the IT services company to boost revenue and profit.
“SEC has initiated an investigation into this matter. The company will cooperate with the SEC’s investigation,” Infosys said.
India’s markets regulator Securities and Exchange Board of India (SEBI) has also requested additional information from Infosys concerning the anonymous complaints, the IT firm said in a filing to the exchanges, adding that it was also aware of a securities class action lawsuit that has been filed against the company in federal court in the U.S. based on the complaints. “The company intends to defend itself vigorously in such a lawsuit,” Infosys added..
According to a report by Credit Suisse, the whistle-blowers have accused Infosys CEO Salil Parekh and CFO Nilanjan Roy of procedural lapses and aggressive accounting practices. The three main allegations are: aggressive accounting, such as spreading out costs and up-fronting revenue recognition on some contracts; pushing for higher risk-taking by the treasury function to boost ‘other income’; and biased and incomplete reporting in investor presentations and annual reports.
The last time Infosys was mired in such a controversy was in 2017 when whistle-blowers alleged that the then CEO, Vishal Sikka, overpaid for a couple of acquisitions. While nothing was proven against the company, it resulted in Sikka’s exit, followed by that of other senior management.
Shares of Infosys Limited closed at 635.40 a piece, down 2.36% on the BSE on Thursday, while the Sensex, ended the day marginally down by 0.10%.