Quant MF’s Sandeep Tandon & Sumana Paruchuri file for settlement with Buch-led Sebi

Quant Group founder and chief investment officer Sandeep Tandon’s name has appeared once again in a matter related to serious charges involving front-running and insider trading—two basic types of market manipulation. Tandon and Sumana Paruchuri, a high net worth investor, have reportedly filed for settlement with the Securities and Exchange Board of India (SEBI), the country's capital market regulator. The development comes at a time when SEBI has reportedly unearthed alleged front-running transactions amounting to Rs 70-80 crore in the matter and follows its raids in two different cities in the country in June last year. 

This is yet another instance where under its current Chairperson Madhabi Puri Buch, SEBI has permitted a questionable arrangement involving select honchos like Tandon. Under its current chairperson Buch, SEBI has yet to pass an ex-parte order after conducting raids in June 2024. 

And if you look at history, this is not the first time when SEBI—once known for its firm stance against abusive market practices—has failed to use an emergency measure in due time. 

Let’s delve deeper into this news.

SEBI’s consent terms permit the alleged wrongdoers to pay fine (and move on!) without admission or denial of guilt.  SEBI’s decision to allow such an arranagement draws eery similarities to its handling of the Ketan Parekh case, wherein it did not take prompt action by passing an ex-parte order. 

Now, let's define 'settlement' in legal terms. A settlement is an arrangement allowed between two or more parties involved in a dispute, allowing them to resolve the matter without admitting or denying guilt. So, why is it problematic? In this case, SEBI has allowed the settlement amidst its ongoing investigations in the matter. 

If you remember, despite some of its funds doing wonders for multitudes for investors, Quant MF has also been in headlines related to SEBI’s investigations in the alleged front-running matter involving Tandon. One of the country’s top performing fund houses in recent times, Quant MF has a whopping more than Rs 2 lakh crore in assets under management (AUM). 

In June 2024, SEBI conducted raids at Quant MF’s headquarters in Mumbai and Paruchuri’s premises in Hyderabad as part of its investigations in suspected front-running, insider trading and misuse of power. The market regulator then wrote to State Bank of India (SBI) seeking details of certain transactions involving Paruchuri. However, investigators found that prior information related to the searches was already being leaked to the parties involved. 

And SEBI has yet to pass an ex-parte order in the Quant MF matter, despite its searches months ago. 

For the unversed, SEBI is empowered by law to conduct raids when in possession of sufficient information and evidence found against fair market practices. Notably, the court had granted an order in this case, suggesting that the regulator was in possession of incriminating evidence. 

Quant MF के संदीप टंडन ने फ्रंट रनिंग मामले में सेबी के साथ सेटलमेंट के लिए दी अर्जी...

विस्तार से जानिए क्या है पूरी खबर #QuantMF #SEBI #sandeeptandon @talktotarun pic.twitter.com/CJTLNgQftB

— Zee Business (@ZeeBusiness) January 10, 2025

Who is Sumana Paruchuri? What's her possible connection with Quant MF?

Paruchuri has been reportedly connected to top echelons of police, politicians and bureaucrats in Hyderabad, apart from company promoters.

During the raids last year, investigators reportedly found several incriminating documents, materials and unaccounted assets at her residence. 

According to SEBI data, Paruchuri may have been front-running Quant MF's trades.

Paruchuri can be holding stake in some companies where Quant has invested, according to a SEBI official.

What are ex-parte orders and when does SEBI use them?

At SEBI, an ex-parte order is an emergency measure that temporarily restricts or prohibits a person or entity from engaging in certain activities in the securities market. There are a few distinct characteristics of this powerful tool that make it unique. An ex-parte order is issued without a hearing, is typically temporary in nature and is reserved only for emergency-like situations. 

For instance, in 2023, SEBI passed an ex-parte order before raiding social media influencers. 

However, in the Ketan Parekh case, SEBI passed the order 18 months after the raids, which defeated the purpose of the emergency measure.