India's capital markets regulator, the Securities and Exchange Board of India (Sebi), has launched a significant investigation into potential insider trading violations surrounding a major share sale transaction involving Yes Bank. The probe focuses on alleged illegal gains made using unpublished price-sensitive information (UPSI) ahead of the bank's $1.1 billion capital raise in July 2022.
Regulatory Scrutiny on Professional Firms and PE Investors
According to reports, Sebi has issued formal notices to multiple entities connected to the transaction, including executives from prominent professional services firms PricewaterhouseCoopers (PwC) and Ernst & Young (EY), as well as officials from US-based private equity giants Carlyle Group and Advent International. The regulator's investigation remains ongoing, with a total of 19 entities reportedly named in the notice.
Allegations of Unlawful Trading Activities
The Sebi notice alleges that certain current and former executives at PwC and EY, along with their relatives, utilized confidential information about the impending deal to trade in Yes Bank shares before the transaction was publicly announced. This allegedly allowed them to profit from subsequent price movements. Additionally, the notice claims that executives at Carlyle Group and Advent International improperly shared UPSI related to the deal, constituting a violation of Sebi's stringent insider trading regulations.
A former Yes Bank board member has also been implicated in the same investigation, highlighting the wide net cast by the regulator in this high-profile case. While some entities are accused of actively trading based on insider knowledge, others are alleged to have been negligent in handling the sensitive information surrounding the transaction.
The $1.1 Billion Capital Infusion Deal
In July 2022, Yes Bank successfully raised $1.1 billion through a strategic share sale, allocating approximately 10% of its equity to Carlyle Group and Advent International collectively. The announcement of this substantial capital infusion triggered a positive market response, with Yes Bank shares opening 6% higher on July 30, 2022, the trading day following the deal's disclosure on July 29.
The professional roles in the transaction were clearly defined: EY served as the tax advisor for Advent International, while PwC acted as the advisor for Carlyle Group. Furthermore, a specialized division within EY was responsible for conducting the valuation assessment for Yes Bank regarding this deal.
Responses and Regulatory Protocol
When approached for comments by media outlets, Advent International, Carlyle Group, EY, PwC, and Yes Bank reportedly did not provide immediate responses. This aligns with Sebi's established protocol of refraining from public commentary on matters under active investigation, ensuring the integrity of the regulatory process.
This development underscores Sebi's continued vigilance in enforcing market integrity and combating financial misconduct within India's rapidly evolving capital markets landscape. The outcome of this investigation could have significant implications for corporate governance standards and compliance practices among financial institutions and advisory firms operating in the country.
