Hello Friends,
“Quant Mutual Fund faces SEBI investigation over front-running”
Well, recently you might have come across this headline in newspapers. Let us decode this news and try to understand the implications of front-running. Let me tell you, this is not the first case of front-running, there have been many such cases recently.
Aditya Birla Mutual Fund: In April 2024, SEBI settled front-running allegations involving Aditya Birla Mutual Fund, with four entities paying a total of ₹3 crore and facing a six-month debarment.
Axis Mutual Fund: In March 2023, SEBI barred Viresh Joshi and 20 others from accessing the capital markets, impounding ₹30.5 crore in ill-gotten gains.
What is Front running?
In brief, front running is an illegal and unethical practice wherein the intermediary executes orders for their account before executing orders for clients by taking advantage of the privileged information available to them in advance.
How is it impacting the returns of investors?
The prices drive up since the fund manager purchases the stock before the fund itself. Eventually, due to such artificial price movements, investors end up paying more for securities.
This shakes the confidence of investors leading to redemptions and a decrease in the Net Asset Value (NAV) of the fund. Further, as investors you must be aware of how your money is being handled.
See you soon.