Amid market regulator Securities and Exchange Board of India (SEBI) investigation into Quant Mutual Fund over front-running allegations, the fund house has revealed that it is fully cooperating with regulatory reviews.
For the unversed, front running is the act of trading in a stock, mutual fund or other financial assets while possessing insider knowledge of a future transaction.
SEBI officials have searched the Asset Management Company's (AMC) offices in Hyderabad and Mumbai in connection with the probe, claimed a report by Moneycontrol. The report, quoting sources, alleged that the profits from the front-running operations amounted to Rs 20 crore.
Amid the probe, the AMC, founded by Sandeep Tandon, confirmed that it received inquiries from SEBI.
"Recently, Quant Mutual Fund has received inquiries from SEBI, and we want to address any concerns you may have regarding this matter. We want to assure you that Quant Mutual Fund is a regulated entity, and we are always fully committed to cooperate with the regulator throughout any review. We will provide all necessary support and continue to furnish data to SEBI on a regular and as-needed basis," Quant Mutual Fund stated in a clarification issued to its investors on Sunday.
Quant Mutual Fund, which is the fastest-growing AMC in the country, currently has an asset under management (AUM) of more than Rs 84,030 crore up from Rs 100 crore in 2019. It has five fund managers across 27 funds and maintains 79 lakh folios.
The latest probe comes two months after Aditya Birla Mutual Fund faced a similar front-running probe. SEBI later allowed the four applicants in the case to settle the case by paying more than Rs 2.8 crore. A voluntary debarment of six months from the securities market was also imposed on them.
In February 2023, Viresh Joshi, the former chief dealer of Axis Mutual Fund, and 20 others were banned from securities markets in connection with an alleged front-running case linked to the fund house.
In April, SEBI gave nod to changes to its regulations, including improve surveillance, internal control measures and escalation processes in a bid to curb fraudulent transactions after seeing a rise in number of front-running, insider trading activities and misuse of sensitive information. Dealers and fund managers are also required to record all communication during market hours except face-to-face and out-of-office interactions.