SEBI bars Franklin Templeton from launching new debt schemes for 2 yrs, fines ₹5 cr
Franklin Templeton to refund investment management and advisory fees collected from June 4, 2018, till April 23, 2020, with respect to the six wound-up debt schemes along with simple interest at the rate of 12 per annum
Market regulator SEBI has barred Franklin Templeton Asset Management (India) from launching new debt schemes for two years. In an order on Monday, the market watchdog also imposed a ₹5 crore penalty on the asset management company, which is to be paid within 45 days.
The fund house has been ordered to refund the investment management and advisory fees collected from June 4, 2018, till April 23, 2020, with respect to the six wound-up debt schemes along with simple interest at the rate of 12 per annum. The amount, which stands at over ₹512 crore, is to be paid within 21 days from today and will be utilised towards repaying unitholders.
Franklin Templeton had wound up six of its schemes - 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 - citing redemption pressures and liquidity crunch in bond market.
Through an audit and subsequent proceedings, SEBI ascertained that the company is guilty of serious lapses and violations. The regulator has held Franklin Templeton responsible for replicating high–risk strategy across several schemes, miscalculating Macaulay duration to push long term papers into short duration schemes, non–exercise of exit options in the face of emerging liquidity crisis, lapses in securities valuation practices, as well as risk management practices and investment related due diligence.
"The serious lapses and violations appear to be a fall out of the noticee’s [Franklin Templeton] obsession to run high yield strategies without due regard from the concomitant risk dimensions. The noticee ought to have realised that the past track record in respect of high–risk strategies is no guarantee against future mishaps," SEBI noted in its order.
"For a fund house which has been in this industry in India for over two and a half decades, it is surprising that its systems to monitor and manage critical risks like liquidity, credit and concentration are less than robust. The effectiveness of these systems stand compromised in the process of the noticee’s single minded pursuit of reaping high yield," it further added.
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Business NewsMutual FundsNewsSEBI bars Franklin Templeton from launching new debt schemes for 2 yrs, fines ₹5 cr
First Published:7 Jun 2021, 08:36 PM IST
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