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Sebi Investigates Quant Mutual Fund For Alleged Front-Running

By Nithya Bose in Business News, posted June 27, 2024

The Securities and Exchange Board of India (Sebi) is investigating Quant Mutual Fund, one of India’s fastest-growing asset managers, for alleged front-running activities.

Front-running is an illegal practice where trades are made using privileged information before a larger client executes those trades.

Sebi has conducted search and seizure operations at Quant’s Mumbai head office and the addresses of suspected beneficiaries in Hyderabad.

Sources quoted in the The Economic Times report revealed Sebi’s surveillance system detected transactions by certain entities

closely matched Quant Mutual Fund's transactions, raising suspicions of information leakage.

A source said: “Sebi's surveillance system threw up alerts that transactions of the suspected entities are matching with Quant Mutual Fund's transactions. How does it match?”

Sebi suspects a dealer from Quant or a broking firm handling the fund’s orders might have leaked trade information.

During the search operations, Sebi seized digital devices, including mobile phones and computers, to gather evidence.

Examining these devices aims to identify who was sharing confidential trade information.

Based on initial findings, Sebi plans to question individuals accessing Quant’s trade information, focusing on executives who knew the size and timing of orders and could have passed this information to external beneficiaries.

Quant Mutual Fund has issued a clarification, confirming it has received inquiries from Sebi and assured investors of its full cooperation with the market regulator.

It said: “As a policy, we don’t comment on media reports. However, to maintain transparency, we want to address any concerns.

“Recently, Quant Mutual Fund has received inquiries from Sebi, and we want to assure you that Quant Mutual Fund is a regulated entity.

“We are always fully committed to cooperating with the regulator throughout any review and will provide all necessary support.”

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“We will provide all necessary support and continue to furnish data to Sebi on a regular and as-needed basis."

Sebi has not officially commented on the matter.

Quant Mutual Fund has rapidly become one of India’s top-performing fund houses, managing assets worth nearly Rs 1 lakh crore across several schemes.

The small-cap scheme alone, with assets of Rs 21,243 crore, has returned 68 percent over the past year. Following the development, small and midcap stocks on Dalal Street fell sharply.

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