The Securities and Exchange Board of India (SEBI) has found serious lapses in the way Franklin Templeton India Mutual Fund managed the six debt funds that wound up suddenly in April 2020, and banned it from launching similar schemes for the next two years.
The fund house had announced shutting its six debt mutual fund schemes citing redemption pressures and lack of liquidity in the bond market.
SEBI has now asked the fund house to return fund management fees worth Rs 451.63 crore to investors of the six debt funds and levied 12 per cent interest fee on this amount which totals up to Rs 512.50 crore.
The amount is to be paid within 21 days and will be utilised towards repaying unitholders. SEBI further imposed a monetary fine of Rs 5 crore on the fund house.
Franklin Templeton had wound up six of its schemes — Franklin India Ultra Short Fund/Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Fund/Plan, Franklin India Income Opportunities Fund, Franklin India Dynamic Accrual Fund, and Franklin India Credit Risk Fund.
SEBI said serious violations were committed by the senior management of fund house and decided to penalise the head of Franklin Templeton Asia Pacific, Vivek Kudva and his wife Rupa Kudva.
Both have been restricted from accessing the securities market and from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of one year.
They have also been restricted from liquidating their existing holding of securities including the units of mutual funds.
SEBI said Vivek Kudva will be liable to pay a monetary penalty of Rs 4 crore for redemptions undertaken on his own behalf and on behalf of Vasanthi Kudva, and Roopa Kudva will be liable to pay a monetary penalty of Rs 3 crore for the redemptions from her account.
“The serious lapses and violations appear to be a fall out of the noticee’s (Franklin Templeton) obsession to run high yield strategies without due regard from the concomitant risk dimensions. The noticee ought to have realised that the past track record in respect of high-risk strategies is no guarantee against future mishaps,” SEBI said in its order on Monday.