Tag: Franklin Templeton

SEBI fines Franklin Templeton AMC, bars Vivek and Rupa Kudva from securities market for 1 year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a major blow for Franklin Templeton Asset Management Company (FT-AMC), the Securities and Exchange Board of India (SEBI) has barred the fund house from launching any new debt scheme for two years, while imposing a penalty of Rs 5 crore for violation of regulations in the shutting down of six debt schemes last year.

In its order on Monday, the capital market regulator said that Franklin Templeton Mutual Fund has been found to have violated the provisions of the Mutual Funds Regulations and also certain SEBI circulars.

The market regulator has also restrained the head of Franklin Templeton Asia Pacific (APAC) Vivek Kudva his wife Rupa, MD of Omidyar Network India from accessing securities market for one year. SEBI has ordered Vivek and Rupa to transfer Rs 30.70 crore of redeemed FT units to escrow account within 45 days. Vivek will pay a monetary penalty of Rs 4 crore, while Rupa will pay monetary Rs 3 crore as penalty.

Additionally, SEBI has initiated adjudication proceedings against certain employees of FT–AMC including the chief executive officer, chief compliance officer and the director.

FT-AMC will refund investment management and advisory fee of Rs 512 crore including interest.

“As a result of the irregularities in the running of the debt schemes inspected, loss has been caused to the investors. The noticee was under a statutory obligation to abide by the provisions of the Mutual Regulations and circulars issued thereunder, which it failed to do.

“Each of the provisions contained in Sections 15A(b), 15D(b), 15D(f), 15E and 15HB of the SEBI Act mandate a maximum penalty of Rs 1 crore. Accordingly, I am of the view that a monetary penalty of Rs 5 (five) crore be imposed under Section 15I of the SEBI Act read with Rule 5 of the SEBI Inquiry Rules, on the Noticee for the violations,” Securities and Exchange Board Of India’s Whole Time Member G. Mahalingam said in the order.

Franklin Templeton will have to pay the penalty within 45 days of the order.

The order also said that it shall refund the investment management and advisory fees collected from June 4, 2018, till April 23, 2020, with respect to the six debt schemes inspected along with simple interest at the rate of 12 per cent per annum, to the respective schemes, within a period of 21 days from the date of this order, for utilisation towards repayment of the concerned unitholders.

In the event of failure to comply with the direction, the noticee shall pay simple interest at 12 per cent per annum, which shall commence from the date the amount becomes payable.

In addition, the findings in the instant proceedings have brought on record several irregularities in the running of the debt schemes inspected, contrary to the interests of the unitholders in such schemes.

The irregularities also extend to failures to exercise adequate due diligence, carry out valuation of securities as per the principles of fair valuations and ensuring a robust risk management framework.

“In my view, the employees of FT-AMC may be liable for the aforementioned irregularities arising during the course of business of the noticee. From the records made available before me, I note that SEBI has initiated adjudication proceedings against certain employees of FT-AMC including the Chief Executive Officer, Chief Compliance Officer and the Directors,” the order said.

The SEBI noted that the matter examines the compliance of the AMC of a mutual fund to the norms during the period leading up to the winding up of the six schemes managed by the AMC, in April 2020.

So far, the fund house has distributed Rs 14,572.34 crore among the concerned investors in three tranches.

The unitholders of the six shut schemes will get Rs 3,205.25 crore in the week starting from Monday, the CEO had informed the investors in a letter.

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No adverse findings against Franklin Templeton, its employees so far

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Franklin Templeton Mutual Fund, which closed down its six schemes in April 2020, has said that so far there have been no adverse findings against the fund house or its employees or management.

This comes following reports of markets regulator Securities and Exchange Board of India (Sebi) issuing show-cause notices to the fund house and its officials with regards to the fund house’s practices around risk management, inter-scheme transfers and personal transactions by employees and management, among others.

“We have submitted detailed responses to show-cause notices issued by Sebi. We cannot go into detail of our responses, but we believe that we acted in compliance with applicable regulations and rules and that we have strong defenses to the allegation,” Sanjay Sapre, President of Franklin Templeton Asset Management (India) Pvt Ltd, said in a letter to investors.

With respect to the accusations regarding personal transactions of employees and management, the fund house said it takes such matters seriously.

The personal redemptions by certain individuals before the winding-up decision are under review and those individuals have cooperated fully with that process and submitted detailed responses to Sebi, which are under consideration, Sapre said in the letter on Friday.

He further said, “the schemes under winding up continue to have significant investment from employees and management of Franklin Templeton (as well as from the asset management company and other group companies of Franklin Templeton)”.

He assured investors that the fund house has been fully transparent with the regulator and has extended its fullest cooperation to them, to help them examine the circumstances surrounding the winding-up of these schemes by Franklin Templeton last year.

“I also want to take this opportunity to address some recent unsubstantiated reports regarding Franklin Templeton’s practices around risk management, inter-scheme transfers and calculation of the Macaulay Duration, amongst others, as well as personal transactions by employees and management,” Sapre said.

He said these issues remain under regulatory review, “we are constrained from commenting on specific details at this juncture, but we can confirm that to date, there have been no adverse findings against Franklin Templeton or its employees or management”.

Franklin Templeton MF closed six debt mutual fund schemes in April 2020, citing redemption pressure and lack of liquidity in the bond market.

The six schemes are Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund.

According to Sapre, SBI Funds Management, the Supreme Court-appointed liquidator, is in the process of preparing to liquidate the schemes under winding up and distribute proceeds to unitholders at the earliest opportunity.

SBI Funds Management, with support from Franklin Templeton, has finalised the Standard Operating Procedure (SOP) to monetise assets of the schemes and distribute the proceeds.

It has filed the SOP with the Supreme Court. “We anticipate that SBI Funds Management will commence active monetisation very shortly,” Sapre said.

SBI Funds Management has already distributed Rs 9,122 crore to investors.

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Franklin Templeton case: SC rejects objections raised by investors against e-voting results

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Supreme Court has rejected the objections raised by a few investors against e-voting results in the Franklin Templeton case. The apex court has directed for the winding up of its six mutual fund schemes and said that disbursement of funds will continue as per the earlier orders.

In January, Franklin Templeton Mutual Funds had received a nod from over 90 percent of unit holders to close the six suspended debt funds The voting results indicated that FT would not be required to resort to selling its underlying assets.

The report by T.S. Krishnamurthy, who was the observer for the e-voting process, mentioned that more than 96 percent of unit holders were in favor of winding down the six debt schemes.

The e-voting process had taken place during December 26-28, 2020.

Franklin Templeton MF closed these six debt mutual fund schemes on April 23, 2020, citing redemption pressure and lack of liquidity in the bond market.

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Franklin Templeton gets unit holders’ nod for closure of 6 debt schemes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Franklin Templeton Mutual Funds has received a nod from over 90 percent of unit holders to close the six suspended debt funds, a court-appointed observer told the Supreme Court on Monday.

The voting results indicate that FT would not be required to resort to selling its underlying assets.

The report by T.S. Krishnamurthy, who was the observer for e-voting process, mentioned that more than 96 percent unit holders were in favour of winding down the six debt schemes.

The e-voting process had taken place during December 26-28.

A Franklin Templeton spokesperson said: “We are thankful to our unit-holders for voting overwhelmingly in favour of the orderly winding up in all 6 schemes. We deeply appreciate the support of our investors and partners and hope to commence distribution of investment proceeds at the earliest, subject to the directions of the Supreme Court in the next hearing scheduled to be held on 25 January 2021.”

The fund house had announced in April 2020 to shut the funds due to unfavourable conditions in the bond market due to the Covid-19 pandemic

Last month the Supreme Court had directed the fund house to seek the consent of the unit holders over the winding up of the schemes in a week.

The six concerned debt schemes are Franklin India Low Duration Fund, Dynamic Accrual Fund, Credit Risk Fund, Short Term Income Plan, Ultra Short Bond Fund and Income Opportunities Fund.

On Sunday, Franklin Templeton said that it has have received cash flows of Rs 13,789 crore since winding up in April, 2020 till January 15, 2021.

According to the fund house, during January 1-15, these schemes received Rs 669 crore, of which Rs 617 crore was as pre-payments.

Further, the cash available as of January 15, 2021 stands at Rs 9,190 crore for the five cash positive schemes, subject to fund running expenses.

Individually, Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Dynamic Accrual Fund, Credit Risk Fund and Short Term Income Plan have 63 per cent, 50 per cent, 41 per cent, 26 per cent and nine per cent of their respective assets under management in cash, Franklin Templeton said in a statement.

Borrowing levels in Franklin India Income Opportunities Fund continue to come down steadily and currently stand at six per cent of AUM, it had said.

(With inputs from IANS)

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Franklin Templeton’s shut funds receive Rs 13,120 crore so far

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Franklin Templeton’s six shut schemes have received Rs 13,120 crore from maturities, pre-payments, and coupons since their closure in April. Over the latest fortnight, December 16-31, 2020, these schemes received Rs 1,213 crore.

Further, five out of the six schemes have already turned and have close to Rs 8,527 crore available to return to unit holders, subject to fund running expenses. Franklin India Short Term Income Plan (FISTIP) is the latest scheme to turn cash positive, the fund house said in a statement.

Individually, Franklin India Low Duration Fund, Ultra Short Bond Fund, Dynamic Accrual Fund, Credit Risk Fund and Short Term Income Plan have 52 percent, 49 percent, 41 percent, 23 percent and 8 percent of their respective asset under management in cash.

Borrowing levels in Franklin India Income Opportunities Fund continue to come down steadily and currently stands at 6 percent of its AUM.

The Supreme Court had directed the Trustee of Franklin Templeton Mutual Fund to seek consent of the unitholders for the winding up of the six schemes. Accordingly, the Trustee conducted the e-voting for the same from December 26-28, 2020 followed by a unitholder meet on December 29, 2020.

The fund house said that as directed by the top court, redemptions in these schemes will continue to be suspended till the date of the next hearing scheduled in the third week of January 2021.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow