To soothe investors’ nerves, Franklin Templeton India clarified that the ban by Securities and Exchange of Board of India (SEBI) prohibiting it from launching new debt funds would have no impact on existing funds that have $8 billion in assets under management.
Earlier this week on Monday, the SEBI had banned Franklin Templeton India from launching any new debt schemes for two years on account of “serious lapses and violations” in its operations while looking into sudden closure of its six credit funds in April last year.
The market regulator has also ordered the fund house to refund investment and advisory fees collected from June 4, 2018, till April 23, 2020 for these six schemes, along with interest 12 per cent per annum. This amount, calculated at over ₹512 crore by SEBI has to be submitted within 21 days of the order and will be used for repaying unitholders. Franklin Templeton has also been fined ₹5 crore that it is supposed to pay within 45 days of the order.
Registering strong disagreement with the SEBI order, Franklin Templeton has expressed its intention to challenge the same before Securities Appellate Tribunal (SAT). Meanwhile, in an e-mail to investors on Wednesday, the fund house reportedly tried to address misgivings about any broader impact on its other funds.
“I would like to clarify upfront, that the SEBI order has no impact on other schemes managed by Franklin,” news agency Reuters quoted India President Sanjay Sapre as saying in the email.
Franklin Templeton continues to manage more than ₹61,000 crore ($8.36 billion) for more than 2 million investors in India, he added.
The asset management company has been mired in regulatory probes and legal battles since April 2020 after it abruptly wound up six credit funds in India, namely Franklin India Ultra Short Fund/Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Fund/Plan, Franklin India Income Opportunities Fund, Franklin India Dynamic Accrual Fund, and Franklin India Credit Risk Fund. At the time of closure, these schemes had assets worth $4 billion under management
Franklin Templeton had blamed lack of liquidity in bond market due to the coronavirus pandemic and redemption pressures for the move. Those funds had large exposure to higher-yielding, lower-rated credit securities.
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