SEBI instructs Franklin Templeton to ensure return of $4.1 bn to investors

Franklin’s global Chief Executive Officer Jennifer Johnson on a post-earnings conference call said to SEBI that India’s new rules on investment in unlisted debt “orphaned” a third of their funds.

India’s capital markets regulator rebutted claims that tighter rules pushed Franklin Templeton into freezing six debt funds last month, and said the asset manager should focus on returning the $4.1 billion to investors.

Franklin Templeton has been asked by SEBI to return the money frozen by the company. (Aniruddha Chowdhury/Mint)

The Securities and Exchange Board of India’s comments come after Franklin’s global Chief Executive Officer Jennifer Johnson on a post-earnings conference call said India’s new rules on investment in unlisted debt “orphaned” a third of their funds as these bonds could no longer be traded.

The new regulations were enforced after the collapse of a major infrastructure financier in September 2018, SEBI said in a statement Thursday. The rules were created by a committee that included representation from Franklin, according to the statement.

“Despite the regulations being clear, some mutual fund schemes seem to have chosen to have high concentrations of high risk, unlisted, opaque, bespoke, structured debt securities with low credit ratings and seem to have chosen not to rebalance their portfolios even during the almost 12 months available to them so far,” SEBI said.