Franklin Templeton MF, SEBI put on notice by Madras HC

Safeguarding investors’ money

– Last month, Franklin Templeton had closed six debt funds, citing redemption pressures and lack of liquidity in the bond markets

– Since then, market regulator SEBI has asked the fund house on multiple occasions to focus on repaying the investors at the earliest

– The investors’ group said it is launching an online petition to bring together all affected investors and the same would be forwarded to the PMO and the US parent of the fund house and the US markets regulator SEC

New Delhi, May 29

Notices have been issued to crisis-hit Franklin Templeton Mutual Fund and SEBI by the Madras High Court after a petition was filed by an investors group to safeguard nearly Rs 28,000 crore of investors’ money stuck in six schemes shut down by the fund house, according to a statement.

The investors’ group, Chennai Financial Markets and Accountability (CFMA), also said it is separately launching an online petition to bring together all affected investors and the same would be forwarded to the Prime Minister’s Office and the US parent of the fund house and the US markets regulator SEC.

It further said mutual funds and fund managers should be made to answer questions on their choice of investment, and compliance with regulatory and prudential norms, among others.

Last month, Franklin Templeton had closed six debt funds, citing redemption pressures and lack of liquidity in the bond markets. Since then, capital market regulator SEBI has asked the fund house on multiple occasions to focus on repaying the investors at the earliest.

According to the CFMA, the Madras High Court issued notices on May 26 to SEBI, Franklin Templeton Asset Management India Pvt Ltd (FTAMC), trustees of the mutual fund, its president Sanjay Sapre, fixed income CIO Santosh Kamath and other key management personnel after a PIL was filed by it.

The high court took cognisance of the seriousness of the matter wherein the money of the common public, amounting to about Rs 28,000 crore, is at risk of getting wiped off and has asked SEBI to file a reply along with a status report on the actions taken by it, the CFMA said.

As per the investors group, Franklin Templeton MF in their own admission has stated that the recovery of money across six schemes will be in the range of 5-81% over a period of over 5 years.

“Given the fact that six schemes had Rs 28,000 crore of assets under management, average loss to unit holders taking 20% as average realisation, would be around Rs 22,400 crore. This is the size of hole in the pocket of common man where the principal amount is wiped off,” it added.

Nithyaesh Natraj, the counsel for the CFMA, said in the present difficult times, the unit holders which otherwise have right to liquidate their holdings, will have to wait for over 5 years and by then FTAMC would have left the Indian shores.