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Franklin Templeton won’t launch new debt funds for now, Supreme Court told
Franklin Templeton Asset Management told the Supreme Court that it will not launch new debt schemes till SAT decides appeal against Sebi’s order.
NEW DELHI: The Supreme Court on Monday got an undertaking from Franklin Templeton Asset Management (India) against the launch of any fresh debt schemes till the Securities Appellate Tribunal (SAT) takes a final call on the market regulator SEBI’s decision to bar the company from launching any new schemes
The top court was hearing an appeal filed by the Securities Exchange Board of India (SEBI) against a June 28 order passed by SAT staying the SEBI order of June 7 that restrained Franklin Templeton from going ahead with the launch of any new schemes.
Reminding the company that the public should not be cheated, the bench of justices S Abdul Nazeer and Krishna Murari said the court was still struggling with the fallout of the company’s six schemes being abruptly shut down in April 2020 citing redemption pressures and lack of liquidity in the bond market.
“You are well aware of what has happened to your six schemes. We are still struggling with those schemes. We are not concerned about the refund (to be paid by the company) but the public should not be cheated,” the bench said.
On June 7 this year, SEBI ordered Franklin Templeton Asset Management Company (FTAMC) not to launch any fresh schemes and directed a refund of investment management and advisory fee along with interest calculated at 12% per annum. This amount came to a little over ₹512 crore.
Appearing for SEBI, solicitor general Tushar Mehta said the SAT figure of over ₹512 crore was not an imaginary figure as the same was calculated under statutory rules. He even sought a stay of the order passed by SAT that stopped the order prohibiting FTAMC from issuing fresh debt schemes.
Senior advocates Harish Salve and Abhishek Manu Singhvi, appearing for FTAMC, said they were willing to give an undertaking not to issue any fresh schemes till the disposal of their appeal by SAT. As the next date for the tribunal to hear the case is on August 30, Salve said, “Between today and 31st (of August), no scheme will be launched.”
The bench took this statement on record and said in its order that FTAMC undertakes that no new scheme will be launched till the disposal of the appeal before SAT. On the issue of refund, Salve said this is an interim order by which the tribunal has directed the firm to deposit 50% of the total amount.
The bench agreed that the order with regard to 50% deposit was “quite fair” and told SEBI that it could contest the appeal before the tribunal. The court gave four weeks’ time for SEBI to file its response before SAT.
On July 14, the top court held that closure of any scheme will require the trustees to seek the consent of majority unitholders after publishing a notice giving reasons for winding up the said scheme.
The closure of the six schemes led SEBI to order a forensic audit as the discontinued schemes had approximately ₹25,000 crore as assets. The schemes were Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund, and Franklin India Income Opportunities Fund. The probe by SEBI found “serious lapses” with regard to the closed schemes.
Finding SEBI’s refund order against FTAMC as “excessive”, SAT ordered the company to deposit ₹250 crore in an escrow account.
