New Delhi

Quant Mutual Fund, one of India's largest asset managers overseeing $11 billion, is facing a regulatory probe by the Securities and Exchange Board of India (SEBI). SEBI is probing alleged irregularities in Quant's Management and investment practices, with search and seizure operations conducted at locations in Mumbai and Hyderabad, according to a Moneycontrol Report.

Advertisment

Quant Mutual Fund has reacted to the probe. The company stated, 'We will provide all necessary support and continue to furnish data to SEBI on a regular and as-needed basis.' The fund house has grown exponentially in the recent year, from managing Rs 100 crore in 2019 to over Rs 93,000 crore currently. The fund has been a key beneficiary of the surging inflows into the stock market from local individual investors.

At the core of SEBI's investigation is the practice of 'front-running.' Front-running is the illegal practice of trading stock or any other financial asset by a broker with inside knowledge of a future transaction that could affect prices. In this, a fund manager executes orders from their own account before executing orders from their clients.

This is detrimental to ordinary investors, who are exploited for profits. Investors end up paying more for securities due to artificial price movements.

Advertisment

SEBI has taken similar actions in 2022 on Axis Mutual Fund for front-running. This resulted in 21 entities being barred from capital markets.

Quant Mutual Fund faces severe penalties and possible suspension if the claims hold ground. The probe is set to weigh on smaller stocks the fund holds, such as RBL Bank, Aasti Pharmalabs, and metal machinery maker Ador Welding.