Money & Banking

Franklin Templeton MF: SC says SAT direction of ₹250-crore deposit is ‘fair’

PALAK SHAH Mumbai | Updated on July 27, 2021

SEBI argued that reducing the penalty amount will set a precedent

The Supreme Court has allowed Franklin Templeton Mutual Fund (FTMF) to deposit ₹250 crore into an escrow account instead of ₹512 crore as earlier directed by SEBI.

In June, the market regulator had asked FTMF to return nearly ₹512 crore it had collected as management and advisory fees since June 2018 on its six debt schemes that were shut down last year. Further, SEBI had banned the fund from launching any new debt schemes for two years.

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But the Securities Appellate Tribunal (SAT) stayed the SEBI penalty after Franklin Templeton challenged the market regulator’s order. SAT also found the SEBI penalty ‘excessive’ and directed FTMF to deposit ₹250 crore in an escrow account till the case is disposed of. SEBI had challenged this in the top court.

SEBI argued that reducing the penalty amount will set a precedent because its decision to ask the company to return ₹512 crore was based on facts and statistics.

However, the Bench of Justices Abdul Nazeer and Krishna Murari said that the court will not interfere with the SAT order. “Four weeks further time is given to SEBI before SAT, Mumbai. We direct SAT to dispose of the matter expeditiously as possible,” the Supreme Court said.

FTMF submitted that it would not launch any new debt schemes till the matter is disposed of by SAT.

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‘A drop in the ocean’

“The SC feels that ₹250 crore is enough. But the real question is how will this help the investors. The amount is just a drop in the ocean against what FTMF owes its investors. Also, ₹250 crore is peanuts versus the adjustments that FTMF has done in its books,” said Anil Jain, a chartered accountant and investor litigating the case in the Supreme Court.

Jain says that ₹512 crore that SEBI had asked FTMF to deposit was based on the NAV adjustments done by the fund house and it was the clawback amount that would have come to the unitholders. “There is a huge difference in the NAV of the six debt schemes that FTMF had given in April 2020, when the schemes were shut, versus the NAV they gave out recently. Of the ₹512 crore, ₹452 crore was clawback amount and ₹60 crore the interest on it. After a scheme is shut, rules do not provide for daily NAV adjustments. Investors say FTMF on its own resorted to declaring NAV adjustments even after the schemes were shut and brought down the valuation and thereby influenced the clawback amount,” Jain says.

Franklin Templeton declined to comment on the Supreme Court order.

Published on July 26, 2021

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