Quant Mutual Fund is under SEBI's scrutiny | What is Front-Running?

Summary

The Capital Markets regulator SEBI has conducted search and seizure operations on COR Mutual Fund, suspecting front running, as reported by Moneycontrol.com. With assets under management of 93,000 CR Rupees, the fund, founded by Suep Tundun, has grown rapidly since its 2017 inception. Despite not responding to initial queries, COR Mutual Fund later confirmed receiving inquiries from SEBI and pledged full cooperation. The fund, known for its top performance in the small-cap segment, is now under scrutiny for alleged front running, an illegal practice of profiting from large order execution, with the probe involving transactions potentially amounting to 20 CR Rupees.

Takeaways

• 🏦 QU Mutual Fund, with assets under management of 93,000 CR Rupees, is under suspicion of front running by SEBI according to a report by Moneycontrol.com.
• 🔎 SEBI has conducted search and seizure operations on two locations of QU Mutual Fund, one in Mumbai and another in Hyderabad, on June 21.
• 📧 QU Mutual Fund did not initially respond to queries but later confirmed receiving inquiries from SEBI and expressed commitment to cooperate in an email to investors on June 23rd.
• 📈 Founded by Suep Tundun, QU Mutual Fund obtained a license from SEBI in 2017 and has been the fastest-growing mutual fund in the country.
• 📊 The fund's assets have grown from around 100 CR Rupees in 2019 to 90,000 CR currently, surpassing 50,000 CR in January this year.
• 🏆 QU Mutual Fund's Small Cap Fund has been the top-performing fund in its segment over the past 5 and 3-year periods, delivering an annualized return of 45% compared to a category average of 31%.
• 🚀 In the past year, the fund achieved a return of 69%, significantly outperforming the category average of 55%.
• 💹 Notably, in May, 43% of total flows into the Small Cap Fund category went into QU's Small Cap Fund, as reported by Moneycontrol.
• 🚨 Front running is an illegal practice where fund managers or brokers put their own orders first, profiting from large orders that move the stock price when executed.
• 🔍 The case linked to QU Mutual Fund involves front running allegations, with the exact nature of the allegations and the extent of the probe not fully disclosed.
• 💰 The alleged profits from the transactions being probed by SEBI are close to 20 CR Rupees, but it is unclear if the management is under investigation or if the probe relates only to external parties.

Q & A

What is the issue with QU Mutual Fund as reported by Moneycontrol.com?

QU Mutual Fund is suspected of front running by the capital markets regulator SEBI, with search and seizure operations conducted on the fund.

What is the significance of the search and seizure operations conducted by SEBI on QU Mutual Fund?

The operations indicate that SEBI has strong suspicions of illegal activities, such as front running, which is a serious regulatory concern.

What was the response of QU Mutual Fund to the allegations?

QU Mutual Fund confirmed receiving inquiries from SEBI and assured investors of their commitment to cooperate with the regulator and provide necessary support.

When was QU Mutual Fund founded and by whom?

QU Mutual Fund was founded by SUEP TUNDUN and obtained a mutual fund license from SEBI in 2017.

What has been the growth trajectory of QU Mutual Fund's assets?

The fund has experienced rapid growth, with assets increasing from around 100 CR rupees in 2019 to 90,000 CR currently, surpassing 50,000 CR in January this year.

How has QU Mutual Fund's Small Cap Fund performed in comparison to its category?

The Small Cap Fund has been the top-performing fund in its segment over the past 5 and 3-year periods, delivering an annualized return of 45% compared to a category average of 31%, and a return of 69% over the past year compared to a category average of 55%.

What is front running and why is it considered illegal?

Front running is an illegal practice where fund managers or brokers put their own orders first, knowing about upcoming large trades, to profit when the large order is executed and moves the stock price. It's illegal because it gives an unfair advantage and can manipulate the market.

How does front running typically occur in the context of mutual funds?

Front running can occur by purchasing large blocks in trading accounts not in the name of the person buying, which are then moved to the fund's account, resulting in higher acquisition prices for publicly owned mutual funds.

What was the case involving the fund manager of EXIS Mutual Fund as reported by Moneycontrol.com?

The fund manager of EXIS Mutual Fund and 20 entities linked to him were probed by SEBI in a front-running case, according to a Moneycontrol.com report.

What is the current status of the allegations against QU Mutual Fund?

The exact nature of the allegations and the status of the investigation are not clear from the script. However, the probe by SEBI is ongoing, and the alleged profits from the transaction being investigated are close to 20 CR rupees.

How has the news of the allegations impacted QU Mutual Fund's operations or investor relations?

The script does not provide specific details on the impact of the allegations on operations or investor relations, but it mentions that QU Mutual Fund has assured investors of their commitment to cooperate with the regulator.