India Regulator Accuses EY, PwC Executives of Insider Trading in Yes Bank

As per Reuters report, India's securities regulator, SEBI, has accused executives from the local units of EY and PwC, along with others, of insider trading violations related to a 2022 share sale by Yes Bank. The allegations involve sharing unpublished price-sensitive information, breaching insider trading rules. 

Details of the Insider Trading Allegations 

SEBI's notice, issued in November, accuses 2 executives from PwC and EY, along with 5 family members and friends, of making unlawful gains by trading Yes Bank shares ahead of its 2022 share offering. The accused individuals are mostly still employed at their respective firms. 

The investigation revealed that executives from Carlyle, Advent, PwC, and EY shared sensitive information, allowing others to trade based on this information. A former Yes Bank board member was also implicated in sharing price-sensitive information. 

Background of the Yes Bank Share Offering 

The regulatory notice followed an investigation into Yes Bank's share movements before a July 2022 offering, where Carlyle and Advent acquired a combined 10% stake for $1.1 billion. The bank's shares opened 6% higher the day after the deal was announced on July 29, 2022. 

Compliance Issues at EY and PwC 

SEBI's notice highlights weak compliance processes at EY and PwC. EY failed to place Yes Bank on a sufficiently broad "restricted list," allowing staff not directly involved in the transaction to trade shares. PwC lacked a "restricted stock list" for advisory and consulting clients, leading to unreported trades. 

Read More: SEBI Plans Reforms to Ease Trading and Improve Market Efficiency! 

Responses and Potential Consequences 

The accused individuals and their companies are preparing responses to SEBI's notice. A show cause notice is SEBI's initial step post-investigation, seeking responses from the accused. If upheld, they may face monetary penalties or restrictions under Indian securities regulations. 

Conclusion 

The allegations against EY and PwC executives mark a significant regulatory action in India, highlighting the importance of compliance with insider trading rules. The case underscores SEBI's ongoing efforts to curb market manipulation and insider trading. 

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