Quant MF under Sebi lens for irregularities in investment activities

'Searches' conducted at fund house's office last week; quant MF confirms 'inquiries' from Sebi

The Securities and Exchange Board of India (Sebi) is investigating Quant Mutual Fund for alleged irregularities in investment-related activities by managers, according to sources familiar with the developments.

According to sources, Sebi officials conducted searches last week at the fund house’s office, which has around Rs 80,000 crore assets under management (AUM).

The market regulator’s action follows discrepancies noted during regular inspections, the sources said. Audit firms had also flagged concerns after their inspections, which they had submitted to Sebi.

Queries emailed to Sebi remained unanswered. 

In a communication to investors late on Sunday, Quant MF said it has received inquiries from Sebi.

"Recently, Quant Mutual Fund has received inquiries from SEBI, and we want to address any concerns you may have regarding this matter. We want to assure you that Quant Mutual Fund is a regulated entity, and we are always fully committed to cooperate with the regulator throughout any review. We will provide all necessary support and continue to furnish data to SEBI on a regular and as-needed basis," it said.

Quant MF has seen significant growth in recent years driven by retail inflows. Its AUM surged from Rs 233 crore in March 2020 to Rs 80,470 crore presently.

The MF is known for its different style of investments based on analytics.

People with direct knowledge of the developments said a few more fund houses might face Sebi scrutiny for alleged irregularities.

In efforts to curb such practices, Sebi recently announced institutional mechanisms following an April board meeting to prevent potential market abuse.

In response, the Association of Mutual Funds of India is formulating a standard operating procedure (SOP) for asset management companies (AMCs) to prevent misconduct like front-running and insider trading.

Sebi has instructed AMCs to enhance surveillance and internal controls to identify misconduct and misuse of sensitive information. Under the framework, the regulator will also put more onus and accountability on the management of AMCs in such instances. AMCs will also be required to have a whistle-blower mechanism to bring transparency.

Earlier, Sebi extended insider trading regulations to mutual fund units to prevent dealings by MF employees and key staff of MFs while they have unpublished price-sensitive information.