YES Bank share sale: SEBI flags insider trading by executives, says report; stock down 3%

Shares of YES Bank saw selling pressure on Friday amid reports of regulatory scrutiny involving its 2022 capital raise. The stock dropped 2.77% to Rs 21.04 apiece on the BSE, down from its previous close of Rs 21.64.

A Reuters report said that the Securities and Exchange Board of India (SEBI) has issued a show-cause notice to several executives. The market regulator has reportedly accused current and former officials at the Indian units of consultancy giants EY and PwC, as well as Carlyle Group and Advent International, of violating insider trading norms.

The scrutiny traces back to July 2022, when Carlyle and Advent invested $1.1 billion to pick up a combined 10% stake in the private lender. According to the regulatory notice reviewed by Reuters, executives at these firms allegedly shared unpublished price sensitive information (UPSI) regarding the impending deal. 

This leak reportedly enabled specific individuals, including friends and family members of the executives, to trade YES Bank stock and make unlawful gains before the deal was publicly announced.

The probe names a total of 19 individuals. While seven are accused of actively trading on privileged tips, four allegedly acted as the sources of that sensitive information. A former YES Bank board member has also been accused of leaking details.

SEBI reportedly found that both EY and PwC failed to maintain a ‘restricted list’, a standard compliance tool that prevents staff from trading in the shares of clients they are advising, the report said.

Reuters reported that SEBI has specifically asked EY India Chairman Rajiv Memani to explain why penalties should not be imposed, arguing that the firm's internal policies failed to restrict trading in companies where it provided non-audit advisory services.

The notice, issued in November, is a preliminary step seeking an explanation. The accused parties are currently drafting their responses. If the charges are proven, they could face monetary penalties or trading bans under Indian securities laws.