According to SEBI, lapses were found in the manner in which six debt funds were suddenly wound up by Franklin Templeton in April 2020.
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Shortly after the Securities and Exchange Board of India (SEBI) ordered Franklin Templeton India mutual fund to return over Rs 500 crore to investors, the company issued a statement marking its objection. Franklin Templeton said it would be moving an appeal before the Securities Appellate Tribunal (SAT) to challenge the order.
According to SEBI, lapses were found in the manner in which six debt funds were suddenly wound up by Franklin Templeton in April 2020. The regulator directed the fund house to return fund management fees worth Rs 451.63 crore to the investors of the six debt funds, and also levied a 12 percent interest fee on this amount. This sums up the total disgorged fee to Rs 512.50 crore.
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Here is the statement issued by Franklin Templeton spokesperson in response to the SEBI order.
We strongly disagree with the findings in the SEBI order and intend to file an appeal with the Hon’ble Securities Appellate Tribunal.
We place great emphasis on compliance and believe that we have always acted in the best interest of unitholders and in accordance with regulations. Our commitment to India remains steadfast. As stated previously, the decision by the Trustee in April 2020 to wind up the funds was due to the severe market dislocation and illiquidity caused by the COVID-19 pandemic and was taken with the sole objective of preserving value for unitholders.
The six schemes under winding up have distributed Rs 14,572 crores to unitholders as of April 30, 2021 and an amount of Rs 3,205 crores is available for distribution as of June 4, 2021. After this distribution in the first week of June 2021, the total amount disbursed will range between 40% and 92% of AUM as of April 23, 2020 across the six schemes. Including the amounts available as of June 4, 2021 for distribution, 71% of the AUM as of April 23, 2020 will have been returned to unitholders in total across all the schemes. The current net asset value of each of the six schemes is higher than it was on April 23, 2020. We believe this supports the decision made by the Trustee in consultation with the AMC and its investment management team to wind up the six schemes.
The schemes have followed a consistent strategy of investing in credits across the rating spectrum and have delivered meaningful outcomes to investors over long periods of time. These schemes provided an important source of funding to growing companies in India that to date have proven to be sound investments. Many of these holdings are now being liquidated by the schemes at fair value under normal market conditions.
Franklin Templeton’s immediate priority and focus remains on supporting the court appointed liquidator in liquidating the portfolio of the schemes under winding up and distributing monies to our unitholders at the earliest, while preserving value.