SEBI accuses EY, PwC executives of insider trading
What's the story
The Securities and Exchange Board of India(SEBI) has accused current and former executives at the local units of PricewaterhouseCoopers (PwC) and Ernst & Young (EY) of violating insider trading regulations. The charges relate to a 2022 share sale by Yes Bank. The regulator also implicated executives from US private equity firms Carlyle Group and Advent International for leaking unpublished price-sensitive information about the deal, thereby breaching insider trading rules.
Charges detailed
Accusations against PwC and EY executives
The SEBI notice, issued in November, accuses two executives from PwC and EY, along with five other family members and friends, of making illegal gains by trading in Yes Bank shares ahead of its 2022 share offering. Most of the accused individuals are still employed at their respective firms. The notice also alleges that Indian executives from Carlyle Group and Advent International shared unpublished price-sensitive information, enabling others to trade on it.
Probe details
Investigation into Yes Bank's share movements
The SEBI notice comes after an investigation into the movement of Yes Bank shares ahead of a July 2022 share offering. Carlyle and Advent had jointly bought a 10% stake for $1.1 billion. The bank's shares opened 6% higher the day after the deal was announced on July 29, 2022. Now, the accused individuals and their companies are preparing responses to SEBI's notice.
Violations listed
SEBI's notice outlines insider trading violations
The SEBI notice lists a total of 19 individuals accused of violating insider trading rules. Seven traded on the basis of unpublished information while four shared it. Eight executives from PwC and EY were named for their lax compliance processes. Ahead of the share offer, Advent had hired EY for tax advisory services and feedback on Yes Bank's management. Separately, Yes Bank had engaged EY Merchant Banking Services for valuation work and PwC for tax planning and due diligence.
Regulatory action
SEBI's notice to EY and PwC
SEBI has issued notices to Rajiv Memani, EY India's chairman and CEO, and the firm's COO, seeking an explanation as to why penalties should not be imposed. The regulator argued that EY's internal trading policy was not compliant with regulations. In PwC's case, SEBI said the firm didn't have a "restricted stock list" for advisory and consulting clients. It also alleged that PwC's internal protocols allowed subsequent trades to go unreported in the Yes Bank case.