SEBI Flags PwC, EY Executives in Yes Bank Share Sale Case

In connection with Yes Bank's 2022 share sale, SEBI has accused current and former officials at PwC and EY's Indian divisions of violating insider trading regulations. US private equity firms Advent International and Carlyle Group were also implicated in this infraction, according to a classified SEBI notice. The notice claims that executives at Carlyle, Advent, PwC, and EY exchanged unpublished price-sensitive information on Yes Bank's July 2022 share offering, facilitating illegal trading. What SEBI’s investigations revealed let’s dig in.

What Triggered SEBI to Probe in Yes Bank’s Share Offering?

The probe concentrates on trading behaviour prior to the 2022 capital raise, when Carlyle and Advent together paid $1.1 billion to acquire a 10% share in Yes Bank. The day following the announcement of the acquisition, the bank's stock increased by 6%. SEBI claims that five family members and friends, as well as two executives from PwC and EY, traded Yes Bank shares prior to the offering in order to profit illegally.

The majority of the defendants are still employed by their respective companies. Nineteen people have been charged with violating the rules against insider trading. Four are accused of disclosing confidential information, and seven are suspected of trading with it. Due to inadequate compliance procedures, eight executives from PwC and EY have been cited. According to SEBI, the bank hired EY Merchant Banking Services for valuation.

While Advent hired EY for tax consulting work and input on Yes Bank's management prior to the share sale. PwC was engaged by Carlyle and Advent for tax planning and due diligence at about the same time. The regulator discovered that both companies had violated confidentiality policies, permitting trading before the capital increase. Additionally, SEBI has charged a former board member of Yes Bank of disclosing such information.

Next Step by SEBI

Following the conclusion of an investigation, SEBI issues a show-cause notice, to which the accused people and businesses are currently formulating answers. Penalties or limitations may be imposed if the accusations are confirmed. According to the notice, EY did not put Yes Bank on a sufficiently broad restricted list. This failure allowed some employees who might have had access to sensitive information to continue trading.

Additionally, SEBI accused EY of violating rules with its internal trading policy and requested an explanation from the company's chief operating officer and chairman and CEO of EY India, Rajiv Memani. SEBI claimed that PwC's internal disclosure system permitted certain trades to go undetected and that the company lacked a restricted stock list for advice and consulting clients. Despite not being directly accused of any wrongdoing, Arnab Basu, the Chief Industries Officer of PwC India, and two former executives have been asked to account for their failure to establish a sufficient code of conduct.