Franklin Templeton AMC has clarified that the current ban by capital markets regulator SEBI prohibiting it from launching new debt funds will not effect its other current schemes. Earlier this week, SEBI imposed a Rs 5 crore penalty and asked the fund residence to refund Rs 512 crore investment management and advisory charges, collected in between June 4, 2018, and April 23, for the six wound-up debt schemes, such as interest at 12% per annum. This quantity will be utilised to repay unitholders, as per SEBI order.
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However, Franklin Templeton has mentioned it disagrees with the findings in the Sebi’s order and has decided to file an appeal in Securities Appellate Tribunal (SAT). In an e-mail sent to investors on June 8, 2021, Franklin Templeton AMC President Sanjay Sapre mentioned that SEBI order does not effect the present monetisation method of the six debt schemes below winding up becoming undertaken by the liquidator. “The order also is not related to and has no impact on the other debt, equity, hybrid and offshore schemes managed by Franklin Templeton,” he mentioned.
Franklin Templeton reiterated that the selection by the Trustee in April 2020 to wind up the funds was on the back of serious market place dislocation and illiquidity triggered by the COVID-19 pandemic and was taken to preserve worth for unitholders. The six debt mutual funds schemes — Franklin India Low Duration Fund, Franklin India Short Term Income Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, and Franklin India Income Opportunities Fund — had been shut last year due to redemption stress and lack of liquidity in the bond market place. These six schemes collectively had about Rs 25,800 crore as assets below management.
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Sapre, in the letter, mentioned the six schemes below winding up have distributed Rs 14,572 crore to unitholders as of April 30, 2021, and an quantity of Rs 3,205 crore is readily available for distribution as of June 4, 2021. After this distribution in the 1st week of June 2021, the total quantity of disbursement would attain Rs 17,778 crore, amounting to 71 per cent of assets below management (AUM) as on April 23, 2020. He also added that Franklin Templeton’s quick priority and focus remains on supporting the court appointed liquidator in liquidating the portfolio of the schemes below winding up and distributing monies to our unitholders at the earliest, even though preserving worth.
Sebi, in its order earlier this week, mentioned it has discovered that Franklin Templeton Asset Management (India) Pvt Ltd has committed really serious lapses/violations with regard to a scheme categorization (by replicating higher-threat method across quite a few schemes) and calculation of Macaulay duration (to push lengthy term papers into quick duration schemes). It also added that Franklin Templeton has committed violations in respect of non-workout of exit choices in the face of emerging liquidity crisis, securities valuation practices, threat management practices and investment associated due diligence.