How Sebi Is Cracking Down on Trade Data Sharing by Global Financial Giants

Stock market regulator Securities and Exchange Board of India (Sebi) has sent legal notices to six funds belonging to Capital Group, one of the largest investment firms in the world. The American company manages $3.3 trillion globally.

The six funds named in the notice are Smallcap World Fund, American Funds Insurance Series Growth-Income Fund, American Funds Fundamental Investors, The Growth Fund of America, AMCAP Fund and Capital Group AMCAP Fund (Lux).

The notice, dated February 2, accuses the funds of failing to keep their trading plans secret, allowing sensitive information about upcoming trades to leak out, reported the Economic Times. It added that the market regulator claims the information was used by others to make illegal profits.

The notice seems to be part of Sebi's effort to crackdown on insider trading by global firms including large accounting companies and its executives. The cases involved firms like PwC and EY.

The Capital Group Case

In the present case, Sebi alleges that two traders at Capital Group, named as James Vincent Cheng and Terence Tsai, who together handled around 90% of the firm's India trading, passed on details of upcoming large orders to a Singapore-based trader named Rohit Salgaocar. He is the director of Strait Crossing Pte Ltd, an unregistered entity in India.The details allegedly shared was specific down to the stock name, share quantity and price, all before the trades were placed in the market, ET reported citing the notice.

Salgaocar, who was already banned by Sebi in January 2025 in connection with this same matter, allegedly passed this information further to Ketan Parekh.

Point to note: Parekh was at the centre of a major stock market crash in 2001 that involved bank fraud and share price manipulation.

Now, Sebi has alleged that Parekh used the advance information to buy or sell shares just before Capital Group's large orders moved the market, making illegal profits in the process.

Sebi reportedly said it found evidence of this through Bloomberg chat logs and WhatsApp messages.

The reported excuse for sharing the information in the first place was that the traders were trying to find buyers or sellers to match Capital Group's large trades, a common market practice.

The Yes Bank Case

This comes after Sebi had gone after executives at PwC and EY, two of the Big Four accounting firms, over alleged insider trading linked to Yes Bank's 2022 share sale, according to a January report by Reuters.

The deal at the centre of this case was a $1.1 billion transaction in July 2022, when private equity firms Carlyle Group and Advent International bought a 10% stake in Yes Bank. The day after the deal was publicly announced, Yes Bank's shares jumped nearly six percent. Sebi's allegation is that some people already knew it was coming.

The regulator issued notices to 19 individuals, accusing them of sharing or trading on unpublished price-sensitive information ahead of the announcement. The notice, issued in November and reported by Reuters, remains confidential.

The connections between the firms are not complicated. Advent had hired EY for tax advisory work. EY's merchant banking arm was also engaged by Yes Bank for valuation services. PwC was brought in by Carlyle and Advent for tax planning and due diligence. Sebi's case is that sensitive deal information travelled through these professional relationships and ended up being traded on.

The regulator found that EY failed to put Yes Bank on a wide enough restricted list. This meant that employees who had access to sensitive deal information were still allowed to trade Yes Bank shares, as long as they were not directly working on the transaction. In PwC's case, Sebi found there was no restricted stock list for advisory clients at all.

EY India's Chairman and CEO Rajiv Memani had been asked to explain why penalties should not be imposed. PwC India's Chief Industries Officer Arnab Basu and two former executives faced similar questions. Reuters noted that most of those named continue to work at their firms.

Notably, a show cause notice is not a conviction. Everyone named has the right to respond, and the legal process is at an early stage. But the pattern is hard to ignore. Sebi is going after giants in order to crackdown on what it sees illegitimate moves made purely for profiteering.