Quant Mutual Fund confirms SEBI probe in suspected front-running case

Quant Mutual Fund has clarified the reports regarding a probe launched by the capital markets regular SEBI (Securities and Exchange Board of India), saying the fund will provide all necessary support to the regulator with regard to allegations of front-running.

The development comes after a media report said SEBI officials searched two locations of the mutual fund company in Mumbai and Hyderabad in a suspected front-running case. Quant accepted to have received queries from SEBI and said that it was fully committed to cooperating with the regulator. "We will provide all necessary support and continue to furnish data to SEBI on a regular and as-needed basis," Quant said in a statement.

The alleged profits via suspected "front running" are pegged at ₹20 crore. SEBI has not issued any official statement on the matter so far.

Quant was co-founded by Sandeep Tandon, its CEO, as a financial services platform in the midst of the 2008 financial crisis. It received a mutual fund licence from SEBI in 2017. The mutual fund has been one of the fastest-growing fund houses in the industry. Its total assets under management (AUM) stood at ₹81,070 crore as of May 31, 2024, a staggering growth from about ₹100 crore in 2017 when it started operations as a mutual fund.

Of Quant's total assets under management, 47% are in large-cap companies while 3% are in debt funds. It has invested money in some the key companies, including Reliance Industries (₹7,504 crore), Adani Power (₹3,993 crore), Jio Financial Services (₹3,873), HDFC Bank (₹2,665 crore), Aurobindo Pharma (₹2,048 crore), Tata Power Company (₹2,021 crore), Steel Authority of India (₹1,895 crore) and LIC (₹1,890 crore), among others.

Front running or forward trading is a prohibited practice, in which a broker or fund manager or anyone with insights exploits market-moving knowledge that's not available in the public domain, which is illegal. This is not an isolated case of front running. Just last year, the capital markets regulator had unearthed ₹30 crore worth of "wrongful gains" via front-running activities at Axis Mutual Fund.

Axis Mutual Fund front-running case

Capital market regulator SEBI on March 1, 2023, had barred Viresh Joshi, former chief dealer of Axis Mutual Fund, and 20 other entities in a case of alleged front-running at Axis Mutual Fund. The regulator said these entities collectively earned ₹30.5 crore as "wrongful gains" via front-running activities, which it directed to be impounded. Axis Asset Management Company Ltd manages investment portfolios of the schemes launched by Axis MF.

The SEBI findings said it was the dealer of the Big Client (Axis Mutual Fund), who had the discretion to decide as to when the orders would be placed. "This when coupled with the fact that the prima facie front running trades were executed from the trading accounts of the conduit noticees who are found to be indirectly connected to the dealer Viresh Joshi."

Viresh Joshi, in his deposition, admitted he negotiated deals for the connected noticee. As a dealer, he decided when to place the orders of the "Big Client" on the exchange platform.