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On 23 April Franklin Templeton had decided to shut down its suite of 6 debt schemes (Bloomberg)
On 23 April Franklin Templeton had decided to shut down its suite of 6 debt schemes (Bloomberg)

FIR lodged against Franklin

  • The FIR is based on a complaint filed by the Chennai Financial Markets & Accountancy, an investor group in May this year
  • This comes even as the Karnataka high court has finished hearing the arguments in the four investor petitions filed against the AMC against its decision to wind down these schemes

Mumbai: The Economic Offences Wing (EOW), Chennai, on Friday registered a first information report (FIR) against Franklin Templeton India, its trustee company, and senior management, including the fund manager, for allegedly defrauding the 300,000 unitholders stuck in its six shut debt schemes. The FIR is based on a complaint filed by the Chennai Financial Markets & Accountancy (CFMA), an investor group, in May this year.

This comes against the backdrop of the Karnataka high court finishing hearing the arguments in the four investor petitions filed against the asset management company (AMC) against its decision to wind down the schemes.

The high court was hearing the cases together and has asked all parties, including the Securities and Exchange Board of India (Sebi), to make their final submissions.

Sebi has also given a copy of the forensic audit report of these schemes to the court in a sealed envelope. The forensic audit, according to a Mint report on 14 September, found that the fund manager did not take corrective steps when underlying bonds started turning illiquid, its short-term funds held long-term securities, and there were excessive redemptions in months before the shutdown. Concern was also not raised for it being the sole lender to 26 issuers. On 23 April, Franklin Templeton decided to shut down its suite of six debt schemes because of severe illiquidity and redemption pressures. These schemes had combined asset under management in excess of 25,000 crore.

CFMA on Friday also said that it is contemplating filing a class action suit against Franklin Templeton global for recovery and to claim damages. It has urged all aggrieved investors to come together for filing the suit, “details of which will be announced soon".

"We have not seen a copy of the First Information Report (FIR) and are not in a position to comment on specific details. The press release issued by CFMA citing the FIR, is replete with various misleading and baseless allegations, besides being inappropriate, as the matter is currently sub-judice," said a Frankline Templeton spokesperson in an emailed response.

The company is not aware of the antecedents of CFMA, and as admitted by them in their original complaint, none of their members were unit holders in the six impacted schemes, the spokesperson added.

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