The Association of Mutual Funds in India has moved SEBI to intervene and stop separate investigation by the Economic Offences Wing of Chennai police based on a complaint registered with it. The mutual fund industry body in a letter written to SEBI said all AMCs and fund managers are concerned that the unprecedented event of a police complaint against a fund house is unheard in the history of mutual funds in India.

“Any bona-fide decisions and actions of mutual funds, which may go awry due to various extraneous reasons, can now be translated into criminal action by non-expert bodies, even when an expert regulatory body has been established under an Act of Parliament, viz. SEBI Act…” said the letter.

The Chennai Financial Markets and Accountability, an investor body, last week had claimed that the Economic Offences Wing of Chennai police had registered an FIR against Franklin Templeton MF and its top officials based on its complaint. In April, Franklin Templeton abruptly closed six of its debt schemes with asset under management of ₹24,000 crore due to huge redemption pressure. Investors have moved the Supreme Court which had directed the Karnataka High Court to hear investors petition.

AMFI said the fear factor and panic among fund managers could lead to an undesirable contagion effect on the entire MF industry, such as mass resignations, over-cautious and over-defensive approach towards investment decisions, resulting in lacklustre performance and must be avoided at any cost.

As a word of caution, AMFI said while it was not seeking to pre-judge the (Franklin Templeton) issue, SEBI should stake its claim as the “sole authority to adjudicate all issues pertaining to the conduct of the mutual funds.”

Such investigation by outside agencies, AMFI said could even impact performances of schemes, as fund managers may adopt an over-defensive or excessively cautious approach due to these fears.

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