What qualities do you look for in a fund manager? What kind of person would you trust with your money? Sandeep Tandon, founder and Chief Investment Officer of the Quant Group, has a career spanning nearly three decades. This might seem promising start for selecting a fund manager. But, in a world where the SEBI chairperson continues to hold office amid a long list of serious allegations—including professional misconduct, misuse of power, and conflicts of interest—it’s difficult to be certain about the integrity of any fund manager.

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And when looking for the right fund manager for your financial goals, you certainly don’t want to see terms like insider trading, random stock selection, or channelising of retail investors’ money towards a big corporate house that nobody is touching or is countering serious charges levelled by a US-based research firm; even if mere allegations. And not to forget, the stocks in the large group were picked at a time when most money managers were not even touching it. 

In the case of Quant MF’s Tandon, however, there are many such terms and instances, and they are not merely allegations. 

In this special series, Zee Media will, one by one, unearth the ugly truth behind the nascent and embattled leadership of Buch as chairperson of what should be India’s top financial institution whose primary job is to ensure a transparent and fair capital market for the humble investor. 

For the unversed, until recently, SEBI was investigating Quant Mutual Fund for suspected front-running, insider trading, and misuse of power. On June 21, officials from the market regulator searched the fund house's headquarters in Mumbai and related locations in Hyderabad—all under the leadership of Buch who took SEBI’s helm from Ajay Tyagi in March 2022.

SEBI insiders have indicated that the Chairperson's interference in this investigation has delayed regulatory action, allegedly at the behest of New Delhi and a big industrialist, along with his 'fixer’. A fair and transparent investigation must be conducted to protect nearly Rs 1 lakh crore in savings and investments belonging to over a million investors across the country, including those of reputable temple trusts and public corporations.

There is sufficient evidence to suggest that the SEBI Chairperson has stalled actions due to political interference and intervention from an industrialist who has negotiated for personal gain in return. Additionally, the CEO continues to receive protection from both the regulatory body and the political/industrial network.

At the time of publishing this report, email queries sent to Capri Global and Quant Mutual Fund remained unanswered.

Insider trading, front running, bad stock selection… Who is saving such a fund manager and why?

In a groundbreaking move setting a new standard for the country’s capital market, SEBI sought a warrant for search and seizure from the competent court at Kala Ghoda in Mumbai for the first time in its history. The warrant was to raid the premises of Quant Mutual Fund, its CEO and CIO Sandeep Tandon, and an individual client in Hyderabad in connection with alleged front-running and insider trading. SEBI also suspected, with adequate evidence, other irregularities in various compliance issues, inadequate KYC on investor accounts, and failure to follow proper processes in investment decisions at the fund. The regulator suspected the mutual fund was running bogus investor portfolios.

The fund’s CEO is accused of misconduct, favouring a Hyderabad-based woman reportedly connected to top echelons of the city’s police, politicians, and bureaucrats. On June 21, search and seizure operations were carried out simultaneously at the residences of the CEO and the woman. At her residence, officials found numerous incriminating documents, materials, and unaccounted assets.

The woman was found to have engaged in insider trading and front-running in approximately 10-15 shares, the same stocks as the fund. Notably, these trades occurred just before the CEO or the fund executed their orders, suggesting a concerted fraudulent effort. The search also revealed top-secret correspondence from SEBI to her bankers seeking investigative material, indicating apparent collusion between SEBI and bank officials in leaking information about impending actions to her and the fund’s CEO.

And arrives the fixer…

In today’s SEBI, it is evident that this issue might have been buried under the influence of a Mumbai-based fixer, reportedly part of an industrial house. The fund’s CEO allegedly turned to this fixer, Rajesh Sharma, who is a major shareholder in Capri Global. Additionally, the fund is reported to have made dubious investments in collaboration with fixers and promoters of several listed companies, including Lancer Containers, Om Infra, Primo Chemicals, Best AgriLife, Equinox India, and IRB Infra. A stark fact about these stocks is that no other fund or institution is an investor in them, and an institutional investor cannot justify many such investments. 

Many analysts say that the list of stocks picked have cost investors thousands of crores of hard-earned money. 

Quite shockingly, the fund’s Assets Under Management (AUM)—a key measure of a mutual fund's size—grew exponentially from Rs 100 crore to Rs 1 lakh crore over a questionably small span of time, leading to more doubts about whether the funds were from genuine investors or from miscreants trying to game the system. 

Over the past year, the Hyderabad-based woman facilitated numerous meetings with promoters for the CEO/CIO. The fund’s CEO is alleged to have traded based on price-sensitive information available during the silent period, and the woman also traded on this information while accompanying the CEO to meet company promoters. The companies are prominent players in the pharmaceutical, energy, and consumption sectors. 

She has also employed her son at the fund to facilitate information sharing and quid pro quo arrangements. The CEO provided this employment/internship in violation of established norms and practices regarding due diligence and confidentiality, creating a clear conflict of interest with the fund’s investors and SEBI regulations. 

Despite the gravity of the situation, it has been many months, and no action has been taken by the SEBI Chairperson to bar the fund’s CEO or protect investors, particularly millions with smaller portfolios.

Buch-led SEBI… What is so peculiar about it?

Today, while Buch and her husband Dhaval Buch are dealing with a barrage of serious allegations that put her leadership at SEBI in question—charges denied by the couple—many renowned financial experts have raised serious questions about SEBI’s integrity. Also, hundreds of SEBI’s own senior personnel have uncovered instances of sheer unprofessionalism.

Tip of the iceberg

In the ‘Buch-led SEBI, its Friends & Enemies’ series, the journalists of Zee Media will continue to uncover the grey pages of fixers and Quant MF under the nose of Buch-led SEBI, all part of the ongoing Hindenburg vs. Adani saga. Follow this series find answers to all the questions concerning the humble, and irked, retail investor of the country. 

Keep following this special series for more such stories on the dubious nexus of fund managers, fixers, and regulatory authorities.

Now, as we dive deeper into the matter, there are a few basic questions that remain unanswered: 

  • In the Quant Mutual Fund matter, can one infer, on the basis of the available details, that the SEBI chairperson suppressed a fair trial? 
  • If bold allegations are made against corporate promoters or other SEBI-regulated entities, and the regulator does not like them for any other reason, is the law applied differently? 
  • Is the current regime under SEBI leadership characterised by vindictiveness, unfairness, and corruption, with the law being applied selectively based on quid pro quo or personal biases? 
  • Are people targeted or given preferential treatment depending on their connections or motivations? 
  • Are allegations against corporate promoters or other SEBI-regulated entities handled differently if the regulator has ulterior motives, suggesting a system influenced by fixers and vested industrialists?

Zee Media will provide more details related to the matter very soon.