New Delhi: In a major blow for Franklin Templeton Asset Management Company (AMC), the 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.
“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.
Franklin Templeton to Appeal Against SEBI Ban
Meanwhile, Franklin Templeton Mutual Fund was planning to approach the Securities Appellate Tribunal (SAT) against the SEBI order barring the fund house from launching new debt schemes in the country for two years along with imposing a penalty of Rs 5 crore.
A Franklin Templeton spokesperson said: “We strongly disagree with the findings in the SEBI order and intend to file an appeal with the Hon’ble Securities Appellate Tribunal.” The spokesperson said that the company places great emphasis on compliance and believes that it has 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 spokesperson noted that the six schemes under winding up have distributed Rs 14,572 crore to unitholders as of April 30, 2021, and an amount of Rs 3,205 crore is available for
distribution as of June 4.
Big Trouble for Franklin Templeton AMS Director Vivek Kudva, Wife Roopa Kudva
SEBI has debarred Franklin Templeton AMC Director Vivek Kudva and his wife, Roopa Kudva for one year from the securities following an investigation. A fine of Rs 4 crore
has been slapped on Vivek Kudva and Rs 3 crore on his wife.
They have also been asked to return an amount of Rs 22.64 crore in an escrow account to the SEBI, which will be released to them along with the cash being disbursed to other investors. This
is the amount they received on redemption before the six schemes of Franklin Templeton Mutual Fund were shut last year.
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