SEBI MOVES SC AGAINST SAT ORDER ON FRANKLIN MF

The Securities and Exchange Board of India (Sebi) has moved the Supreme Court against the June 28 order of the Securities Appellate Tribunal (SAT), which stayed the former’s decision to bar Franklin Templeton Asset Management (India) from launching new debt schemes for two years and had asked the fund house to refund a little over ~512 crore.

The capital markets regulator moved the top court on Wednesday against the relief granted to Franklin Templeton.

In a related appeal filed by Franklin Templeton regarding the winding up of its six mutual fund schemes, the apex court on Wednesday delivered a key verdict, holding that the trustees are required to seek consent of majority unit-holders for closing MF schemes after publishing notice disclosing reasons for their decision to wind up debt schemes.

In the fresh appeal, Sebi has assailed the SAT’S decision that had termed its order on the refund amount as “excessive”.

The tribunal had asked Franklin Templeton to deposit ~250 crore in an escrow account, instead of ~512 crore as directed by Sebi.

The appeal was filed against Sebi’s June 7 order, which said Franklin Templeton violated certain provisions of mutual fund norms in relation to the management of the six debt schemes, which are now closed.

The fund house was directed to refund investment management and advisory fees, along with interest, at the rate of 12 per cent per annum — amounting to ~512.50 crore. Further, the company was prohibited from launching new debt schemes for two years and penalty of ~5 crore was levied on it.

In its order, the SAT noted that 21 debt schemes were still being managed by Franklin Templeton, and no complaint against these schemes had come to the fore.

“The mere fact that the appellant (Franklin Templeton) has chosen to wind up six schemes does not mean that they should be debarred from launching any new debt schemes,” it said.

The SAT had stayed Sebi’s direction, which restrained Franklin Templeton from launching any new debt schemes for a period of two years during the pendency of the appeal of the asset management company.

The tribunal had directed Sebi to file a reply, and had also listed the plea by the company for admission and final disposal on August 30.

However, the markets regulator decided to move the top court against the SAT’S order. Franklin Templeton AMC had announced shutting its six debt mutual fund schemes on April 23, 2020, citing redemption pressure and lack of liquidity in the bond market.