By Chinonyerem Emmanuel
India’s securities regulator has accused senior executives at the Indian units of global consulting firms EY and PwC, along with officials connected to major U.S. private equity groups, of breaching insider trading rules in connection with a high-profile Yes Bank share sale in 2022, according to a confidential regulatory notice reviewed by Reuters.
The Securities and Exchange Board of India (SEBI) alleges that current and former executives at EY and PwC improperly handled unpublished, price-sensitive information related to a major capital-raising deal by Yes Bank, one of India’s largest private lenders.
The regulator has also accused executives at private equity firms Carlyle Group and Advent International of sharing sensitive information tied to the transaction, in violation of India’s insider trading regulations.
The allegations stem from a July 2022 share offering in which Carlyle and Advent jointly acquired a 10% stake in Yes Bank for about $1.1 billion. SEBI’s investigation focused on unusual movements in Yes Bank’s stock price ahead of the deal’s public announcement.
The bank’s shares jumped roughly 6% when trading opened the day after the transaction was disclosed, prompting scrutiny over whether confidential information had been leaked beforehand.
According to the notice, which was issued in November and has not previously been made public, at least 19 individuals are under investigation. SEBI claims that seven people traded Yes Bank shares based on privileged information, while four others allegedly passed along that information.
The regulator has also flagged eight executives at EY and PwC for what it described as weak or inadequate internal compliance controls.
The notice further alleges that two executives from EY and PwC, along with several family members and associates, made unlawful gains by trading Yes Bank shares before the capital raise was announced.
Most of those named in the notice are still employed at their respective firms, according to people familiar with the matter.
SEBI’s findings suggest that sensitive information circulated across multiple professional advisory relationships. Advent had hired EY for tax advisory work and sought the firm’s views on Yes Bank’s management, while EY Merchant Banking Services was simultaneously engaged by Yes Bank to conduct valuation exercises. At the same time, PwC was retained by Carlyle and Advent to provide tax planning and due diligence services.
The regulator alleges that executives at both consulting firms breached confidentiality norms, enabling certain individuals to trade in Yes Bank shares ahead of the public announcement.
In EY’s case, SEBI said the firm failed to place Yes Bank on a sufficiently broad internal “restricted list,” which is designed to prevent employees with potential access to sensitive information from trading a client’s shares.
While staff directly assigned to the deal were barred from trading, others who may have had indirect access to confidential information were not, the notice said.
SEBI also criticized EY’s internal trading policies, arguing that they did not fully comply with regulatory requirements mandating pre-clearance for anyone in possession of unpublished price-sensitive information.
The regulator has asked EY India’s chairman and CEO, Rajiv Memani, along with the firm’s chief operating officer, to explain why penalties should not be imposed.
SEBI emphasized that EY did not impose broad restrictions on trading in listed companies for which it provided advisory, consulting, valuation, or investment banking services, apart from audit engagements.
In PwC’s case, SEBI alleged that the firm lacked a formal restricted stock list for advisory and consulting clients. The regulator said PwC’s internal protocols required employees to disclose only their first purchase and final sale of a company’s shares, a structure that allegedly allowed multiple interim trades in Yes Bank stock to go unreported.
PwC India’s Chief Industries Officer Arnab Basu, along with two former executives, has been asked to respond to allegations that the firm failed to implement a robust code-of-conduct framework. None of the named executives has been accused of direct wrongdoing, and requests for comment sent to company spokespersons went unanswered.
The individuals and companies named in the notice are currently preparing formal responses to SEBI, according to people familiar with the process.
A show-cause notice represents the regulator’s first step after concluding an investigation and seeks explanations from those accused.
Depending on the outcome, SEBI could impose financial penalties, trading bans, or other restrictions under India’s securities laws.
The case marks a rare and significant escalation in India’s enforcement actions, as it directly targets senior figures at globally influential consulting and private equity firms.
It also comes amid a broader regulatory crackdown by SEBI on market manipulation and insider trading, at a time when Indian capital markets are seeing a surge in fundraising activity and growing interest from international investors seeking alternatives to U.S. markets amid rising geopolitical tensions.
In recent months, SEBI has taken similar action in other high-profile cases, including allegations of insider trading violations involving Bank of America’s India unit during a fundraising process.
Together, these moves signal a tougher stance by India’s market watchdog as it seeks to bolster investor confidence and strengthen oversight in one of the world’s fastest-growing major economies.
Source Reuters
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