Who doesn’t like a quick buck?
More often than not, people turn to stock markets in the hopes of making tremendous gains.
Correction: Tremendous quick gains.
While some people understand the intricacies of the game, others play with a hunch. Everything is fine, until you start cutting corners to do something illegal. Something that can cost you money, reputation and could even land you in jail.
Yes. Doing illegal stuff in the stock markets is a serious crime with serious consequences. Recently, two employees at Infosys have been charged with committing such an offence. They have been accused of Insider Trading.
Now, before we go any further…
What is Insider Trading, and why is it considered an offence?
So, the “insiders” of a company - directors, senior employees, etc. know a great deal about the company. They are made privy to a lot of “price sensitive information”- like the amount of profit the company is going to report, etc.
Using this information, the “insiders” can “trade” (buy/sell) the company’s shares in the stock market. Since the general public has not been made aware of this information yet, it is seen as an unfair advantage for the insiders.
And so, our market regulator, SEBI, in order to protect innocent investors, penalizes such acts. The penalty for such an offence can go as high as Rs. 25 crores or 3 times the profits that were made using Insider trading. And it doesn’t end here. If one fails to comply, they could be facing a jail term of upto 10 years.
So the question really is, did the employees of Infosys not know all this?
Well, the chances of them not knowing are very less. Because, you see, companies are required to have a code of conduct and internal control in place, that deters employees from getting into such acts.
Then why did they resort to this? (assuming the SEBI’s charges are correct)
Well, the accused employee, Pranshu Bhutra, was obviously not expecting to get caught. He did not just go and buy the shares from his demat account. But, he surely underestimated SEBI’s powers.
SEBI has constructed an elaborate web of how he must have masterminded the trade:
Yes. He was not alone. The money changed several hands. It went from Pranshu Bhutra to a related company. From that company, it went to Amit Bhutra’s mother who then sent the money to Amit Bhutra, who then transferred it to his partnership firms.
Looks like the money literally travelled the whole world. All in an effort to make it difficult for anyone to trace it back to Pranshu Bhutra through the multiple layers that he laid down. All efforts gone in vain!
And, there was one more employee at Infosys, Mr. Venkata Subramaniam, who had the “information”.
He got implicated, just because of the frequency of phone calls that he made to Pranshu Bhutra!
The two of them have exchanged calls around the time when the quarterly results of the company were disclosed. As per SEBI, all the parties together made a cool profit of Rs. 3,06,33,348. Now all of them are facing charges.
The way SEBI has deployed tech to identify this case of insider trading rings a bell of caution for anyone who thinks they will get away with misdeeds.
But, haven’t such warning bells been rung in the past as well? Even then we find such cases in the news every now and then. Why?
The hope of not getting caught, not being as “dumb” as the ones who did, makes people repeat the same thing again and again. And for those who think that they won’t eye such huge gains that will alert SEBI - well, the blindfold of greed increases the risk tolerance. But, greed doesn’t stop! Greed sows and nurtures the forest of crime. The only way to uproot this forest is when someone comes and sets it on fire. (Tweet this)
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