Shares of Cognizant Technology Solutions Corporation (CTSH - Free Report) plunged 13% in Friday’s trading session after it was revealed that the company is carrying out an internal investigation. The probe is related to a possible infringement of US Foreign Corrupt Practices Act with regard to charges of bribery in its Indian operations.
On Friday, the company appointed Rajeev Mehta as its President. Mehta replaces Gordon Coburn. Though media reports suggest that the departure of Coburn is linked to the ongoing corruption probe, the company refrained from commenting over this.
However, a regulatory filing from the company did indicate that it has notified the Justice Department and the U.S. Securities and Exchange Commission regarding the possible violations. This will probably result in some respite with regard to the penalties as a pilot program by the Justice Department allows a company to self-report violations like these in exchange for lower penalties.
The news does not bode well for investors who are already stressed due to sluggish spending levels in the healthcare and financial sectors, the biggest markets for Cognizant.
Moreover, competition from peers like Accenture (ACN - Free Report) , Infosys (INFY - Free Report) and Wipro Ltd. (WIP - Free Report) is mounting, which is another headwind.
Currently, Cognizant has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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