Surveillance finds that an account linked to a dealer's relative bought ahead of 14 of the fund's large orders over six months, earning about 1.1% per trade. How would you confirm the pattern, estimate the harm to the fund, and respond?

The pattern is very unlikely to be chance: 14 of 18 buys landing the day before a fund order has odds of about 1 in 11,384 if the account traded at random. Confirm it with order timestamps and communication records, estimate the harm at between the account's profit of about Rs 6.2 lakh and the fund's excess cost of about Rs 1.68 crore, then escalate, preserve evidence, restrict the dealer and report as the regulations require.

If a colleague is always at the coffee machine when you are, it might be habit or it might be that you both drink coffee at eleven. You only find it odd once you count how often the machine is busy. Suspicious timing becomes evidence only against a base rate: how often would an innocent account land there by chance? 40 of 125 trading days carried a fund order, so a random day has about a 32% chance of being the day before one. An account trading on 18 random days would hit that about 5.8 times. It hit it 14 times.

Statistics raise the question; records answer it. The decisive check is timing within the day: did each account buy come after the fund manager's order reached the dealer and before the dealer executed it? Pull the order management system's timestamps for when each order was created, sent to the desk and executed. Then check who could have known: the dealer, the fund manager, and anyone else on the order's path. Review recorded lines, desk chat and email for those windows, and check whether the relative trades through other brokers too. Also test the innocent explanation: if the relative was simply buying popular mid caps that the fund was also buying, the account would show many similar trades on days with no fund order. It shows four.

There are two measures, and the honest answer gives both. The account's gain is a floor: 14 trades of about Rs 40 lakh at 1.1% is about Rs 6.2 lakh. The fund's harm is the higher price it paid. Compare the fund's slippage against the arrival price on the 14 tainted orders, 0.61%, with its 26 clean orders, 0.37%; the extra 0.24% on Rs 700 crore is about Rs 1.68 crore. That is an upper estimate, because the tainted orders may have been in less liquid stocks, and the gap is far larger than one small account's buying could cause, which suggests the information may have reached others too. Matching tainted and clean orders by stock liquidity and size narrows the range.

First, protect the evidence and the fund: escalate to the chief compliance officer and chief executive, preserve all records, and move the dealer off the desk while the review runs, without tipping off the dealer or the relative. The fund's investors come first, so if harm is established the AMC makes the scheme whole rather than waiting for any recovery from the people involved. Inform the trustees and report to the regulator as the current rules require; AMCs are expected to run surveillance for exactly this, so check the present obligations and timelines. Then fix the controls: personal trading rules that cover relatives, phone and chat restrictions on the desk, and surveillance that scans linked accounts, not just employees'. The limit of a review like this is that it proves timing, not intent; disciplinary and legal findings belong to the people with the authority to make them.