Sandeep Tandon founded Quant MF, which has been one of the country’s fastest growing mutual funds. The fund firm acquired SEBI clearance to begin the mutual fund business in 2017. In January, it topped Rs 50,000 crore in assets with 26 schemes and 54 lakh folios. Quant MF has grown significantly in recent years, owing to retail inflows. Its AUM has risen from Rs 233 crore in March 2020 to Rs 80,470 crore today.
As per June 2024, the SEBI or Securities and Exchange Board of India is closely keeping a watch on the investment company, Quant Mutual Funds after it assumed probability of Foul play and potential future scam from this organisation.
But Why Does The SEBI Suspect Quant MF?
During their routine checks of Quant MF, SEBI detected inconsistencies. These concerns may be related to practices such as front-running, in which someone utilises sensitive data to place deals before clients, providing them with an unfair advantage.
What is Front-Running?
Front-running is a fraudulent technique in which someone with advanced expertise of forthcoming trades buys private stocks before fulfilling orders placed by customers. This enables them to make money unlawfully by rigging the market.
Imagine Raj is a fund manager at ABCD Mutual Fund. He learns that ABCD plans to buy 1 million shares of XYZ Ltd. Knowing this will push XYZ’s stock price up, Raj buys 10,000 shares of XYZ Ltd. For himself at ₹100 each. After ABCD buys the 1 million shares, XYZ’s price jumps to ₹150 due to high demand. Raj then sells his 10,000 shares at the new price, making ₹50 profit per share. So, Raj makes ₹5,00,000 (₹150 – ₹100 x 10,000 shares) by using his insider knowledge, which is illegal and unethical.
HOW DID SEBI SUSPECT QUANT?
- SEBI’s monitoring technology detected a sequence of operations by unidentified people (suspect beneficiaries) that appeared to match Quant MF’s trading.
- The SEBI fears that someone at Quant or the agent business is leaking secret information about planned transactions. This knowledge could be exploited by the fraudulent for creating profitable deals prior to the formal execution, providing them an unfair advantage.
WHAT ACTION IS THE SEBI TAKING?
SEBI raided Quant’s corporate offices in Mumbai and the suspected fraudulent apartment in Hyderabad. SEBI allegedly took computers and cell phones to analyse digital communication and perhaps find suspicious activities.
