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The market regulator, SEBI, has conducted search and seizure operations on the Sandeep Tandon-owned Quant Mutual Fund, suspecting front-running. Sources indicate that the operations took place at two locations: Quant Mutual Fund’s Mumbai headquarters and a suspected beneficial ownership address in Hyderabad.
On Friday, SEBI also questioned Quant dealers and individuals connected to the case. Moneycontrol reached out to Quant Mutual Fund for a response, and the article will be updated upon receiving their reply.
Founded by Sandeep Tandon, Quant Mutual Fund received its license from SEBI in 2017. It has since become the fastest-growing mutual fund in India, with assets soaring from around ₹100 crore in 2019 to over ₹90,000 crore today. In January, the fund surpassed ₹50,000 crore in assets, managing 26 schemes and 54 lakh folios. Its performance has been remarkable, particularly in the small-cap segment, which currently manages over ₹20,000 crore. Over the past five years, Quant Small Cap Fund has delivered an annualized return of 45%, significantly outperforming the category average of 31%. In the past year alone, the fund returned 69%, compared to a 55% category average. Notably, in May, 43% of total inflows into the small-cap fund category went to Quant Small Cap Fund, according to Moneycontrol.
SEBI has intensified its crackdown on mutual funds to eliminate front-running. It has increased search and seizure operations to gather evidence and unravel complex transactions that allow unscrupulous entities to evade detection due to the high burden of proof required by law.
Front-running is an illegal practice where fund managers, dealers, or brokers, aware of upcoming large trades, place their own orders first to profit when the large order moves the stock. This can involve purchasing large blocks in personal accounts before transferring them to the fund account, leading to higher acquisition prices for the publicly owned mutual fund. These transactions are challenging to trace as they are conducted through trading accounts not in the individual’s name.
Previously, SEBI barred Viresh Joshi, the fund manager of Axis Mutual Fund, and 20 associated entities in a front-running case. The regulator identified ₹30.55 crore in illicit gains from these activities and ordered the amount to be impounded.
