In a recent development, another alleged case of front running in the Indian Equity Markets has come to light, with Quant MF facing scrutiny. Despite the impressive track record and significant growth witnessed by the fund house in recent years, these allegations have cast a shadow over its reputation.
For the uninitiated Front Running or tailgating, is the practice of trading a financial asset, such as a stock, by a broker who has advance knowledge of an upcoming transaction that is likely to significantly impact the asset’s price. This inside information could stem from an imminent large order from a client, or from an anticipated buy or sell recommendation by the broker’s firm. Such actions are taken to capitalize on the expected price movement to secure a profit before the information is publicly available.
In the case of Quant, it is alleged that either one of their dealers, other employees, or the broker executing the trades, who had privileged access to transaction details, passed this information to third parties for profit. For instance, if ABC stock was to be sold by the fund house on a given day, this information would be leaked to third-party players. These players would then short sell the ABC stock in advance, profiting from the anticipated price drop resulting from the fund house’s sale. This practice is not only unethical but also illegal. A similar incident occurred with Axis AMC when their dealer, Viresh Joshi, was barred from participating in the equity markets after being found guilty of front-running. For more details on how Axis Front Running Happened click here.
NOTE- Viresh Joshi’s challenge to SEBI’s interim order in the Securities Appellate Tribunal is ongoing.
Now all this might be good information, but what should a unitholder in Quant MF do at present.
Currently, these allegations against Quant remain unproven, but if the fund management team is indeed involved, it would be a significant red flag for investors. Remember the Axis AMC scandal? Former CEO and MD Chandresh Nigam stepped down, followed by the departures of Jinesh Gopani, Head of Equities, and Raghav Iyengar, Chief Business Officer. Despite more than two years having passed since the incident, Axis AMC is still struggling to recover, with fund performance trailing the benchmark during this period.
However, the situation with Quant might unfold differently. Unlike Axis, Quant is a promoter-driven company, with Mr. Sandeep Tandon, the promoter himself, overseeing the investment process. This direct involvement could mitigate the risk of similar disruptions.
Given the uncertainty, it would be prudent to adopt a “wait and watch” approach before making new investments in Quant AMC, including Systematic Investment Plans (SIPs). Existing investors should also stay calm and monitor the situation closely.
Rest assured, we will keep a close eye on developments and keep you updated on any significant changes related to this news.
