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Home / Mutual Funds / News /  Franklin Templeton gets interim relief, SAT stays Sebi order

Franklin Templeton Asset Management (India) Pvt. Ltd on Monday got a temporary relief with the Securities Appellate Tribunal (SAT) staying the Securities and Exchange Board of India (Sebi) order that barred the fund house from launching debt schemes for two years.

The Sebi ban had come after an investigation found that Franklin Templeton had committed serious lapses or violations in managing shut debt schemes. Sebi had ordered the asset management company to refund investment management and advisory fees along with interest at the rate of 12% per annum amounting to 512 crore. A penalty of 5 crore was also levied on the fund house.

Franklin Templeton challenged the order stating that it “strongly disagreed with the findings".

In its interim order, the tribunal on Monday said the fund house should not be debarred from launching any debt schemes as Franklin Templeton was still managing 21 debt schemes and no complaints about those had come to the fore.

“Consequently, the direction in the impugned order restraining the appellant (Franklin Templeton) from launching any new debt schemes for a period of two years shall remain stayed during the pendency of the appeal," SAT said.

The tribunal has listed the matter for further hearing on 30 August.

The tribunal said the fees taken into account was the gross figure and Sebi did not take into consideration the expenses incurred in managing the schemes.

“In our view, prima facie, this appears to be incorrect, in as much as, at best, only profits could be directed to be refunded after deducting the necessary expenses actually incurred by the appellant in managing the schemes… Consequently, the direction to deposit 512,50,92,534 appears to be excessive at this stage," the order read.

In the interim, SAT has asked Franklin to deposit 250 crore in an escrow account within three weeks that shall be subject to the result of the appeal.

Franklin Templeton Mutual Fund had shut six debt schemes with assets of around 26,000 crore on 23 April 2020 after they faced unprecedented redemptions.

The Sebi investigation looked at the robustness of Franklin’s internal systems, compliance, risk management practices, due diligence processes, and the method of categorization of schemes.

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