India’s financial markets were shaken by a major regulatory action this week when the Securities and Exchange Board of India (SEBI) issued a show-cause notice accusing senior executives from global firms including Ernst & Young (EY) and PricewaterhouseCoopers (PwC) as well as personnel associated with Carlyle Group and Advent International, of violating insider trading laws linked to a 2022 Yes Bank share sale. This marks one of the most high-profile enforcement moves in recent years, reinforcing SEBI’s stringent stance against market manipulation and unfair trading practices.
Author : Aashiya Jain | EQmint | Finance News
What SEBI is Alleging
According to a regulatory notice reviewed by Reuters, SEBI’s allegations stem from a July 2022 capital-raising transaction by Yes Bank, when private equity firms Carlyle and Advent International acquired a combined 10 % stake in the bank for about $1.1 billion. A day after the deal was publicly announced on July 29, 2022, Yes Bank’s share price jumped around 6 %, reflecting the market impact of the announcement.
SEBI’s preliminary findings suggest that unpublished price sensitive information (UPSI) about the impending deal was shared among executives or accessed by them before the announcement, enabling certain individuals to trade Yes Bank stock ahead of the public disclosure and potentially earn unlawful gains.
So far, the notice names 19 individuals in connection with the alleged violations. These include:
- Seven individuals accused of trading using confidential information
- Four accused of sharing sensitive data with others
- Eight executives from PwC and EY cited for weaknesses in internal compliance systems that failed to prevent potential insider trading
Many of the accused executives are still working at their respective firms, according to sources familiar with the matter. SEBI’s show-cause notice issued late last year but not previously made public is the first formal enforcement step and seeks responses from the parties involved before any penalties or restrictions are imposed.
What Went Wrong? Compliance Lapses and Confidentiality Gaps
At the heart of SEBI’s concerns are alleged lapses in how PwC and EY handled confidential information related to the Yes Bank deal. In a typical insider trading probe, regulators look at whether firms maintained robust “restricted lists”lists of client companies whose securities employees should not trade due to access to UPSI.
SEBI’s notice suggests that:
- EY India failed to maintain a sufficiently broad restricted list, potentially allowing employees with access to UPSI to trade Yes Bank shares.
- PwC India lacked a comprehensive restricted stock list for advisory and consulting clients, and its internal disclosure system may have permitted trades to go unreported.
These compliance gaps form a significant basis for SEBI’s show-cause actions against the firms and certain senior officers including requests for explanations from executives such as EY India’s Chairman and CEO, Rajiv Memani, and PwC India’s Chief Industries Officer, Arnab Basu. Neither individual has been named as committing wrongdoing, but both have been asked to clarify why penalties should not follow.
Broader Implications for the Market
This insider trading notice comes at a time when Indian capital markets are attracting increasing global interest and deal activity. SEBI has been intensifying its crackdown on market misuse and trading irregularities, seeking to boost investor confidence and ensure fair play. Last year, SEBI also flagged alleged insider trading breaches in other high-profile capital raising deals.
For investors, the action underscores how seriously regulators are treating allegations of privileged information misuse even when it involves executives at major global advisory firms. The unfolding responses from the companies and individuals cited will be closely watched, as will any resulting penalties or policy changes that may follow.
What Happens Next?
SEBI’s show-cause notice is a procedural step that requires the accused parties to respond with their explanations. If the regulator finds their answers unsatisfactory, it could proceed with monetary penalties, trading bans, or other regulatory sanctions under Indian securities laws.
The case is a reminder that robust corporate governance and strict internal controls are not just compliance obligations they are essential to maintaining market integrity, protecting investors, and reinforcing trust in India’s financial ecosystem.
For more such information: EQmint
Resource Link : Reuters
