Franklin Templeton and its top executives have decided to move the Securities Appellate Tribunal against SEBI’s order that banned the company from launching any new debt schemes for two years in addition to imposing a fine of ₹5 crore on the fund house.
“We strongly disagree with the findings in the SEBI order and intend to file an appeal with the Securities Appellate Tribunal,” said Franklin Templeton spokesperson on Tuesday.
“We place great emphasis on compliance. 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 pandemic and was taken with the sole objective of preserving value for unitholders,” said the spokesperson.
On Monday, SEBI asked FT AMC to return nearly ₹460 crore it had collected as management and advisory fees from the investors in the six debt schemes since June 2018 with 12 per cent interest. SEBI had found serious lapses in the way Franklin Templeton India mutual fund had managed the debt funds that were wound up suddenly last April. Additionally, SEBI imposed a penalty of ₹5 crore on Franklin Templeton India AMC for violating various SEBI rules. SEBI also levied a penalty of ₹7 crore.
The company said the amount repaid to investors so far ranges between 40 per cent and 92 per cent of AUM across the six schemes. The current net asset value of each of the six schemes is higher than what it was on April 23 last year. “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 spokesperson said.
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, said the spokesperson.
Kudva mulls next move
Vivek Kudva, Head of Franklin Templeton Asia-Pacific, is also likely to move SAT against the SEBI order that found him and his family members guilty of violating the Prevention of Fraudulent and Unfair Trading Practices.
Kudva has claimed that he has already set aside the proceeds from the sale of units and will not enjoy more than what other investors in the scheme get after the closure of the schemes. “I am reviewing the order and considering appropriate next steps which may include filing an appeal before the SAT,” said Kudva.
“I have always acted in accordance with SEBI regulations, including in this instance. My personal transactions in the two schemes (under wind-up proceedings) have been conducted with no intent to gain an unfair benefit,” he added.