India's Securities and Exchange Board of India (SEBI) has accused executives from EY and PwC, along with individuals from Carlyle Group and Advent International, of insider trading violations related to a 2022 Yes Bank share sale. The accusations stem from a SEBI investigation into trading activity before Yes Bank's July 2022 share offering, where Carlyle and Advent acquired a combined 10% stake in the bank for $1.1 billion.

SEBI alleges that unpublished price-sensitive information about Yes Bank's fundraising plans was shared, enabling unlawful trading ahead of the official announcement. The regulator's notice, issued in November but only recently revealed, identifies a total of 19 individuals implicated in the alleged breaches. This includes current and former executives from the Indian units of PwC and EY, as well as their family members and friends.

Specifically, SEBI alleges that two executives from PwC and EY, along with five of their connected individuals, profited illegally by trading Yes Bank shares before the share offering was made public. The bank's shares subsequently rose by 6% the day after the deal with Carlyle and Advent was announced on July 29, 2022. According to reports, the accused individuals are largely still employed at their respective firms.

The SEBI notice also highlights significant compliance failures at both EY and PwC. The regulator found that EY did not place Yes Bank on a sufficiently broad "restricted list," which is used to prevent employees from trading in shares of companies about which they may have inside information. SEBI contends that this failure allowed staff not directly involved in the Yes Bank transaction to trade the shares. Furthermore, PwC allegedly lacked a "restricted stock list" for advisory and consulting clients, leading to unreported trades.

Ahead of the share sale, Advent engaged EY for tax advisory work and feedback on Yes Bank's management, while EY Merchant Banking Services was hired by the bank for valuation purposes. Simultaneously, Carlyle and Advent hired PwC for tax planning and due diligence. SEBI's investigation suggests that confidentiality norms at both firms were compromised, facilitating the alleged insider trading.

SEBI's action represents a relatively uncommon instance of the regulator targeting global consulting and private equity executives in connection with a capital raising deal. The notice identifies that seven of the 19 individuals accused traded on privileged information, while four are accused of sharing it. Additionally, eight PwC and EY executives have been cited for weak compliance processes. The investigation is ongoing, and further details, including potential penalties, are yet to be announced.