SEBI warns TCS for inadequate investor disclosure in Epic Systems case

The Securities and Exchanges Board of India (Sebi) has issued a warning to Mumbai-based global IT services provider, Tata Consultancy Services Ltd (TCS), for not adequately disclosing the damages in the 2016 Epic Systems' case to investors.

On 28 May, SEBI issued a letter to TCS, which the company later shared on the exchanges regarding the disclosures made to investors. These disclosures were made with respect to law suit filed against TCS in the US Court by Epic Systems.

According to disclosures made by TCS to the exchanges in April 2016, "The Jury's verdict on liability and damages was unexpected as TCS believes that they are unsupported by the evidence presented during the trial. The Jury's verdict will not have any impact on the TCSQ4 and FY16 financial results to be announced on Monday, April 18, 2016."

This goes against the spirit of Sebi (Listing Obligation and Disclosure Requirements) Regulations, 2015, which requires that listed entities will ensure that disclosures made by them are adequate, accurate, explicit, timely and presented in a simple language to the investors.

The regulator warned to be careful while dealing with disclosure of material information in the future and ensure that the details provided are adequate, accurate, explicit and timely. “You are advised to exercise proper due diligence in future and avoid recurrence of such instances," noted SEBI.

Epic Systems had filed a lawsuit in 2014 against TCS alleging that the latter had stolen its intellectual property. In 2016, Epic won a jury award of $940 million. In 2017, the Wisconsin Court judge lowered the amount of the award to $420 million to comply with caps on punitive damages in such cases.

Epic had claimed that TCS employees were brought on as consultants to a Kaiser Permanente Sunnyside Medical Center in Portland to help implement an Epic software there and took more than 6,000 documents containing Epic’s development information by creating a fake user account. The user pretended to be an employee of the hospital and did not disclose that he was a consultant, the lawsuit said.

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