Last Updated on July 14, 2024 at 12:02 pm
On June 23rd 2024, Moneycontrol reported that SEBI conducted search and seizure operations at two locations of Quant Mutual Fund on suspected front-running.
The initial reaction from the AMC: It confirmed via email to investors that it has received inquiries from SEBI.
Then, on June 27th 2024, it sent an FAQ to unitholders. The first was, “1. Has the SEBI enquiry concluded? No, it is a regular ongoing process globally by regulators to collect data and analyze it”.
Then, on July 13th 2024, it sent another email to unitholders, “This has reference to question 1 of the FAQs in the trailing email (the one mentioned above). We have been receiving further queries in this regard. We would like to clarify that the data collected by the regulator was not part of any regular process but was part of a court-approved search and seizure operation with respect to an ongoing investigation initiated by SEBI.”
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First, it said the enquiry was a regular procedure, suggesting it was routine. Then, it says it is not a regular process and was a court-approved search and seizure operation.
To say the least, this is poor communication. Even a non-expert would tell you that it is a lot more serious than a “regular” procedure. With each email, the questions about the investigation have only increased.
It is time Quant MF made the exact nature of the “ongoing investigation” clear to the unitholder. Or to be precise, make it known why they are being investigated. Half-baked answers would only increase the uncertainty. Also see: What Quant MF needs to clarify about the SEBI probe.
It is also time for SEBI to step in and make a statement. Tell the public why they made the raid and the current status of the enquiry. Their silence only makes things worse.
What should investors do?
The official information is still not enough to ascertain the width and depth of the situation. Unsatisfactory as it may be for the reader/investor, it would be imprudent and irresponsible on our part to recommend an exit call based on the information available at the time of writing.
One cannot spread fear and panic without evidence relying only on speculation and fear. It is an uncomfortable position for us, but it is better than spreading fear. Also see: Quant MF SEBI Probe: To exit or not to exit, that is the question.
A “mutual” fund will work only with the cooperation of investors regardless of how they feel about the SEBI probe. If investors get into the “I want my money mode, I don’t care about anyone else” mode, then the whole concept of a mutual fund will quickly break down. Haste makes waste.
If I were a Quant MF investor (I am not), I will wait and watch for clarity before committing more money.