Quant Mutual Fund, one of India’s most rapidly expanding asset managers, is now under investigation by the SEBI on allegations of front-running. A practice known as “front-running,” in which a smaller customer uses insider knowledge to make arrangements before a bigger client does, is illegal. According to the Economic Times, searches and seizures have been conducted at Quant’s Mumbai offices and the residences of prospective beneficiaries in Hyderabad as part of the probe by SEBI.
The investigation began when alerts from SEBI’s monitoring system revealed that the activities of some firms were strikingly similar to Quant Mutual Fund’s. This aroused worries about the potential disclosure of sensitive information. Someone familiar with the inquiry said, “Transactions that were suspiciously similar to trades made by Quant Mutual Fund were flagged by SEBI’s surveillance system.” Because of this trend, many are worried about possible data breaches.
The houses of individuals implicated and Quant’s offices have had digital devices, including as mobile phones and computers, confiscated by SEBI with the purpose of gathering evidence. We will examine these gadgets to determine the source of any potential leaks of confidential trade secrets. A Quant dealer or the brokerage firm in charge of the fund’s orders may have leaked transaction data, according to early results.
In response to the investigation, Quant’s founder Sandeep Tandon reassured investors that the firm will cooperate with SEBI. Quant Mutual Fund was recently questioned by SEBI. If you have any concerns, we would be happy to address them. Given that Quant Mutual Fund is subject to regulation, the firm is committed to collaborating with the relevant authority in order to finalize the evaluation. In a statement, Tandon promised SEBI that they would continue to get data when requested and that they would cooperate fully when asked.
Quant Mutual Fund has grown rapidly and is currently managing assets of about Rs 1 lakh crore across many schemes. On its own, the small-cap program’s assets of Rs 21,243 crore generated a return of 68% in the past year. Dalal Street’s small and midcap companies have fallen dramatically as market sentiment has worsened due to the inquiry.
According to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, “The SEBI investigation into Quant Mutual Fund is a slight negative sentiment for the market.”
Similar front-running investigations were recently conducted on Aditya Birla Mutual Fund. As part of the settlement in the Aditya Birla case, SEBI allowed the defendants to pay more than Rs 2.8 crore and voluntarily debarred themselves from the securities market for six months. As a further example, twenty people, including Viresh Joshi, the ex-chief trader of Axis Mutual Fund, were recently barred from the securities markets over an alleged front-running incident.
The Securities and Exchange Board of India (SEBI) has made regulatory changes to strengthen internal control processes, surveillance systems, and escalation procedures in order to prevent fraudulent transactions in response to the rising number of front-running and insider trading cases. Except for in-person and after-hours trades, all talks between dealers and fund managers now need to be documented during market hours.
Quant Mutual Fund, established by Sandeep Tandon, has grown substantially since its 2019 inception, with AUM increasing from 100 crore to more than 84,030 crore. There are 27 funds managed by five different individuals at this fund company, and 79 lakh folios are under their care. Regardless of the continuing inquiry, Quant Mutual Fund remains committed to being transparent with investors and complying with regulations.
