Sebi on Monday imposed a penalty for violating regulatory norms in the case of winding up six debt schemes in 2020
Franklin Templeton AMC has said Sebi's order prohibiting the company from launching a new debt scheme for two years will have no bearing on existing schemes managed by it.
Sebi on Monday imposed a penalty of Rs 5 crore for violating regulatory norms in the case of winding up six debt schemes in 2020.
However, Franklin Templeton has decided to challenge the direction in the Securities Appellate Tribunal (SAT), as it "strongly disagrees" with the findings in the Sebi's order.
In an e-mail dated June 8 to investors, Franklin Templeton AMC President Sanjay Sapre said Sebi's order does not impact the current monetisation process of the six debt schemes under winding up being undertaken by the liquidator.
"The order also is not related to and has no impact on the other debt, equity, hybrid, and offshore schemes managed by Franklin Templeton," he said, adding that they continue to manage over Rs 61,000 crore of AUM (monthly average AUM as of March 2021) for over 2 million investors in India.
Sebi, in its order, said it had found that Franklin Templeton had committed serious lapses/violations with regard to a scheme categorization (by replicating high–risk strategy across several schemes) and calculation of Macaulay duration (to push long term papers into short duration schemes).
"As a result of the irregularities in the running of the debt schemes inspected, the loss has been caused to the investors. The noticee (Franklin Templeton AMC) was under a statutory obligation to abide by the provisions of the Mutual Regulations and Circulars issued thereunder, which it failed to do," Sebi noted.
Franklin Templeton MF announced shutting its six debt mutual fund schemes on April 23, 2020 citing redemption pressures and lack of liquidity in the bond market.
Sapre, in the letter, said the decision by the Trustee in April 2020 to wind up the schemes was due to the severe market dislocation and illiquidity caused by the Covid-19 pandemic.
After this distribution in the first week of June 2021, the total amount of disbursement would reach Rs 17,778 crore, amounting to 71 per cent of assets under management (AUM) as of April 23, 2020.
Sapre told investors that 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 the unitholders at the earliest while preserving value.