Franklin Templeton case: Considering next step, may approach SAT, says Vivek Kudva

SEBI found serious lapses FT's management of the six debt funds that it wound up suddenly in April 2020 and on June 7 instructed the fund house to return fund management fees worth Rs 451.63 crore to the investors of these funds. (File Image)

Vivek Kudva, Head of APAC Distribution at the troubled Franklin Templeton Asset Management Company (AMC), is “considering the next steps” including filing an appeal before the Securities Appellate Tribunal (SAT) following the Securities and Exchange Board of India (SEBI) order.

“I have the highest regard for SEBI. However, I am reviewing the order and considering appropriate next steps which may include filing an appeal before the SAT,” Kudva said in a statement on June 8.

“I have always acted in accordance with SEBI regulations, including in this instance. My personal transactions in the two schemes (under winding-up) have been conducted in good faith and with no intent to gain unfair benefit,” he added.

Kudva noted that he “had already placed himself in a similar position as investors in April 2020” and proceeds of the redemptions were voluntarily set aside in a manner where he and his family will not receive any more than investors remaining in the schemes. “My interests therefore remain fully aligned with outcomes that investors in the two schemes under winding up will have,” he added.

Meanwhile, a spokesperson for Franklin Templeton said the company has “nothing further to add to Kudva’s statement at this time”.

“At Franklin Templeton, we place great emphasis on compliance, and have policies in place to cover a variety of matters including personal transactions of employees and managing conflicts of interest, consistent with applicable regulations and global best practices. The schemes under winding up continue to have significant investments from employees and management, as well as from the asset management company and other group companies of Franklin Templeton,” the spokesperson added.

SEBI found serious lapses Franklin Templeton's management of the six debt funds that it wound up suddenly in April 2020, and on June 7 instructed the fund house to return fund management fees worth Rs 451.63 crore to the investors of these funds.

It also imposed a penalty of Rs 5 crore on Franklin Templeton India AMC for violations of various SEBI rules and circulars, such as investment and borrowing norms, code of conduct, and principles of fair valuation among others. SEBI, in its order, has stated that it has initiated adjudication proceedings against certain senior employees of the fund house including the CEO, directors and chief compliance officer for "several irregularities" in the running of the debt schemes inspected.

Apart from monetary fines and the directive to return back the fund management fees back to the investors, SEBI has also barred the fund house from launching any new debt scheme for a period of two years.

Franklin Templeton on its part said it would be moving an appeal before the SAT to challenge the order, stating that they "strongly disagree with the findings in the SEBI order".

The markets regulator, in its investigation, found that Franklin Templeton did not follow the scheme categorisation in the right spirit. It observed that Franklin Templeton had replicated high-risk strategies across several of its schemes and in this period, as the debt market crisis was brewing up, did not exercise the exit options in illiquid securities.