Sebi Accuses PwC, EY Executives of Insider Trading in a 2022 Deal: Here's All We Know

Market regulator the Securities and Exchange Board of India (Sebi) has accused current and former executives at two global accounting giants, PwC and EY, of violating insider trading regulations linked to Yes Bank’s 2022 share sale. The regulator has issued notices to 19 individuals for the alleged breach, according to a Reuters report.

Sebi has also accused executives from private equity firms Carlyle Group and Advent International of sharing unpublished price-sensitive information (UPSI) to trade in Yes Bank shares.

According to the news agency, the notice was issued in November and remains confidential. Sebi alleged that unpublished price-sensitive information related to the transaction was shared among senior executives, enabling unlawful trading ahead of the capital raise. The notice also named a former Yes Bank board member for allegedly passing on sensitive information.

The transaction in question was a $1.1 billion deal in July 2022, when Carlyle and Advent together acquired a 10% stake in the private lender. A day after the deal was announced on July 29, 2022, Yes Bank shares opened nearly 6% higher.

Sebi’s notice alleged that two executives from PwC and EY, along with five family members and friends, made illegal gains by trading Yes Bank shares before the public announcement.

According to the news agency, which did not name the executives, most of the individuals cited in the notice continue to hold positions at their respective firms.

The regulator accused executives at Carlyle, Advent, PwC and EY of improperly handling unpublished price-sensitive information, allowing others to trade on it. Those accused include seven individuals for trading on privileged information, four for sharing it, and eight PwC and EY executives for lapses in internal compliance systems.

Lapses at EY and PwC

Advent had hired EY for tax advisory services and management-related feedback, while EY Merchant Banking Services was engaged by Yes Bank for valuation work. PwC, meanwhile, was appointed by Carlyle and Advent for tax planning and due diligence.

According to the notice, the market regulator found that confidentiality norms at both firms were breached, leading to improper access to sensitive information. It also flagged weaknesses in EY’s internal controls, noting that Yes Bank was not placed on a sufficiently broad “restricted list” that would have prevented employees from trading its shares.

While staff directly involved in the deal were barred from trading, others with potential access to sensitive information were not, in violation of regulatory requirements.

As part of the proceedings, Sebi asked EY India Chairman and CEO Rajiv Memani and the firm’s chief operating officer to explain why penalties should not be imposed, stating that EY’s internal trading policies failed to meet regulatory standards.

In PwC’s case, Sebi said the firm lacked a restricted stock list for advisory and consulting clients and criticised its disclosure framework, which allowed certain trades to go unreported.

PwC India’s Chief Industries Officer Arnab Basu and two former executives have also been asked to respond to allegations of failing to enforce an adequate code-of-conduct framework.

A show-cause notice is the first formal step after an investigation and can lead to financial penalties or other regulatory action if the charges are upheld.