No adverse findings against Franklin Templeton, its employees so far: Sanjay Sapre

Franklin Templeton Mutual Fund, which closed down its six schemes in April 2020, has said that so far there have been no adverse findings against the fund house or its employees or management.

This comes following reports of markets regulator Securities and Exchange Board of India (Sebi) issuing show-cause notices to the fund house and its officials with regards to the fund house’s practices around risk management, inter-scheme transfers and personal transactions by employees and management, among others.

“We have submitted detailed responses to show-cause notices issued by Sebi. We cannot go into detail of our responses, but we believe that we acted in compliance with applicable regulations and rules and that we have strong defenses to the allegation,” Sanjay Sapre, President of Franklin Templeton Asset Management (India) Pvt Ltd, said in a letter to investors.

With respect to the accusations regarding personal transactions of employees and management, the fund house said it takes such matters seriously.

The personal redemptions by certain individuals before the winding-up decision are under review and those individuals have cooperated fully with that process and submitted detailed responses to Sebi, which are under consideration, Sapre said in the letter on Friday.

He further said “the schemes under winding up continue to have significant investment from employees and management of Franklin Templeton (as well as from the asset management company and other group companies of Franklin Templeton)”.

He assured investors that the fund house has been fully transparent with the regulator and has extended its fullest cooperation to them, to help them examine the circumstances surrounding the winding-up of these schemes by Franklin Templeton last year.

“I also want to take this opportunity to address some recent unsubstantiated reports regarding Franklin Templeton’s practices around risk management, inter-scheme transfers and calculation of the Macaulay Duration, amongst others, as well as personal transactions by employees and management,” Sapre said.

He said these issues remain under regulatory review, “we are constrained from commenting on specific details at this juncture, but we can confirm that to date, there have been no adverse findings against Franklin Templeton or its employees or management”.

Franklin Templeton MF closed six debt mutual fund schemes in April 2020, citing redemption pressure and lack of liquidity in the bond market.

The six schemes are Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund.

According to Sapre, SBI Funds Management, the Supreme Court-appointed liquidator, is in the process of preparing to liquidate the schemes under winding up and distribute proceeds to unitholders at the earliest opportunity.

SBI Funds Management, with support from Franklin Templeton, has finalised the Standard Operating Procedure (SOP) to monetise assets of the schemes and distribute the proceeds. It has filed the SOP with the Supreme Court.

“We anticipate that SBI Funds Management will commence active monetisation very shortly,” Sapre said.

SBI Funds Management has already distributed Rs 9,122 crore to investors.