Why is Sebi investigating Quant Mutual Fund and what is front-running

Front-running is an illegal practice in which an intermediary uses advance knowledge of a large pending mutual fund transaction to make personal trades.

Updated on: Jun 24, 2024, 21:02:36 IST

By HT News Desk

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Capital markets regulator Securities and Exchange Board of India (Sebi) has conducted search and seizure operations on Quant Mutual Fund. The Sandeep Tandon-owned MF has assets under management (AUM) of ₹93,000 crore and has been suspected of front-running, Moneycontrol reported as two locations of Quant MF- Mumbai and Hyderabad- were searched by Sebi.

Front-running can impact investors as it results in the stock price to move against the interests of the investor.

What is front-running and how does it work?

Front-running in mutual funds is an illegal practice in which an intermediary uses advance knowledge of a large pending mutual fund transaction to make personal trades. For example, if a broker trades stocks just minutes before a large institutional investor is expected to enter the market, this is front running. As the practice exploits insider information and harms interests of mutual fund as well as its investors, it is illegal in India.

Is the same as insider training?

Both are illegal in India but differ in their nature and the type of information used. For insider trading, trading is based on material, non-public information about a company which can include earnings reports, mergers and acquisitions or other major business developments.

How can front-running impact you?

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Front-running can impact investors as it results in the stock price to move against the interests of the investor. For example: If a mutual fund plans to buy a large number of shares and front-running takes place, the price of the stock increases the purchase is completed. Owing to this, the mutual fund will end up paying a higher price for the shares which will reduce potential returns for investors.

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HT News Desk
Follow the latest breaking news, major developments and agenda-setting stories from India and around the world with the newsdesk at Hindustan Times. Operating round the clock, the desk brings together experienced editors, reporters and correspondents to deliver fast, accurate and contextual reporting across subjects that influence public policy, governance, business, society and international affairs. The HT News Desk covers politics, elections, government policies, the economy, business and markets, science and technology, the environment, law and order, infrastructure, education, climate issues and geopolitics, while closely tracking developments across states, institutions and global capitals. The team also leads coverage of major breaking news events, policy announcements, court proceedings, natural disasters, public emergencies and significant international developments. Reports published by the newsdesk are based on information gathered from reporters on the ground, official statements, government agencies, court records, regulatory filings, recognised institutions and other authoritative sources. Stories undergo editorial scrutiny and verification processes to ensure accuracy, fairness and relevance, and are updated as events evolve and additional information becomes available. Whether covering a key political decision in New Delhi, an economic policy shift affecting millions, a landmark court ruling or a major global event, the HT News Desk aims to provide readers with reliable, fact-based journalism that delivers not only the latest developments but also the context and analysis needed to understand their wider implications.Read More

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