Yes Bank Insider Trading Case: Are “Chinese walls” in deal ecosystems strong enough to prevent insider trading?

Securities and Exchange Board of India (SEBI)‘s investigation into the alleged insider trading in YES BANK shares has reached a stage, with most entities named in the regulatory notice reportedly opting to settle the matter.

According to an article published in The Economic Times titled “𝑴𝒐𝒔𝒕 𝑵𝒂𝒎𝒆𝒅 𝒊𝒏 𝑵𝒐𝒕𝒊𝒄𝒆 𝑶𝒑𝒕 𝒇𝒐𝒓 𝑺𝒆𝒕𝒕𝒍𝒆𝒎𝒆𝒏𝒕”, only three of the 19 individuals named in the notice are actively challenging the allegations, while the others are completing settlement formalities with Securities and Exchange Board of India (SEBI). The case relates to alleged trading in YES BANK shares during the period surrounding the bank’s proposed investment discussions involving private equity investors Carlyle and Advent wherein the information in relation to the discussions were shared by insiders / part of the deal.

In this background, 𝐌𝐫. Sumit Agrawal, Managing Partner of Regstreet Law Advisors, has been quoted by The Economic Times highlighting the regulatory expectations for handling price sensitive information in complex deal ecosystems. Mr. Agrawal observed that: “𝘚𝘦𝘣𝘪 𝘦𝘹𝘱𝘦𝘤𝘵𝘢𝘵𝘪𝘰𝘯𝘴 𝘪𝘴 𝘤𝘭𝘦𝘢𝘳: 𝘳𝘰𝘣𝘶𝘴𝘵 𝘊𝘩𝘪𝘯𝘦𝘴𝘦 𝘸𝘢𝘭𝘭𝘴, 𝘵𝘪𝘨𝘩𝘵𝘭𝘺 𝘥𝘰𝘤𝘶𝘮𝘦𝘯𝘵𝘦𝘥 𝘥𝘶𝘦-𝘥𝘪𝘭𝘪𝘨𝘦𝘯𝘤𝘦 𝘱𝘳𝘰𝘤𝘦𝘴𝘴𝘦𝘴, 𝘴𝘵𝘳𝘪𝘤𝘵 𝘯𝘦𝘦𝘥-𝘵𝘰-𝘬𝘯𝘰𝘸 𝘢𝘤𝘤𝘦𝘴𝘴, 𝘤𝘰𝘯𝘵𝘳𝘰𝘭𝘭𝘦𝘥 𝘥𝘢𝘵𝘢 𝘳𝘰𝘰𝘮𝘴 𝘢𝘯𝘥 𝘥𝘪𝘴𝘤𝘪𝘱𝘭𝘪𝘯𝘦𝘥 𝘤𝘰𝘮𝘮𝘶𝘯𝘪𝘤𝘢𝘵𝘪𝘰𝘯 𝘱𝘳𝘰𝘵𝘰𝘤𝘰𝘭𝘴.”

He further stated that “𝘈𝘴 𝘗𝘌 𝘧𝘶𝘯𝘥𝘴 𝘢𝘤𝘲𝘶𝘪𝘳𝘦 𝘴𝘶𝘣𝘴𝘵𝘢𝘯𝘵𝘪𝘢𝘭 𝘴𝘵𝘢𝘬𝘦𝘴 𝘪𝘯 𝘭𝘪𝘴𝘵𝘦𝘥 𝘦𝘯𝘵𝘪𝘵𝘪𝘦𝘴 𝘸𝘩𝘪𝘭𝘦 𝘴𝘦𝘦𝘬𝘪𝘯𝘨 𝘵𝘰 𝘢𝘷𝘰𝘪𝘥 ‘𝘱𝘳𝘰𝘮𝘰𝘵𝘦𝘳’ 𝘤𝘭𝘢𝘴𝘴𝘪𝘧𝘪𝘤𝘢𝘵𝘪𝘰𝘯, 𝘴𝘤𝘳𝘶𝘵𝘪𝘯𝘺 𝘸𝘪𝘭𝘭 𝘰𝘯𝘭𝘺 𝘪𝘯𝘵𝘦𝘯𝘴𝘪𝘧𝘺 𝘢𝘳𝘰𝘶𝘯𝘥 𝘣𝘦𝘯𝘦𝘧𝘪𝘤𝘪𝘢𝘭 𝘰𝘸𝘯𝘦𝘳 𝘥𝘪𝘴𝘤𝘭𝘰𝘴𝘶𝘳𝘦𝘴, 𝘪𝘯𝘴𝘪𝘥𝘦𝘳 𝘭𝘪𝘴𝘵𝘴, 𝘥𝘦𝘢𝘭-𝘵𝘦𝘢𝘮 𝘳𝘪𝘯𝘨𝘧𝘦𝘯𝘤𝘪𝘯𝘨, 𝘤𝘰-𝘪𝘯𝘷𝘦𝘴𝘵𝘰𝘳 𝘪𝘯𝘧𝘰𝘳𝘮𝘢𝘵𝘪𝘰𝘯 𝘧𝘭𝘰𝘸𝘴 𝘢𝘯𝘥 𝘭𝘦𝘢𝘬𝘢𝘨𝘦 𝘳𝘪𝘴𝘬𝘴 𝘢𝘤𝘳𝘰𝘴𝘴 𝘵𝘩𝘦 𝘢𝘥𝘷𝘪𝘴𝘰𝘳𝘺 𝘦𝘤𝘰𝘴𝘺𝘴𝘵𝘦𝘮”.

A copy of the article is attached.

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