The Securities Appellate Tribunal will pass its order in the matter of Franklin Templeton’s plea challenging the Securities and Exchange Board of India’s directive on June 28. The SAT heard the arguments of both sides on June 25 and then reserved its order.
Franklin Templeton, which wound up six debt schemes last year, contends that SEBI’s order earlier this month banning it from launching any debt scheme for two years with immediate effect was against the principles of natural justice.
The regulator had also imposed a penalty and asked the fund house to refund investment management and advisory fees collected for the six schemes.
FT vehemently opposed the disgorgement, saying the returns of the funds exceeded those of the indices and had benefitted investors. It also said half of the investors were institutions and they had not filed a single complaint against the fund house until the schemes were closed.
FT also denied that all the schemes were not one but different because the returns varied for all of them.
However, SEBI argued that FT had not complied with its well-defined rules and circulars. The market regulator said its directives were based on forensic reports and it had passed the orders after seeking FT’s views.
SEBI also said the amount involved – Rs 25,000 crore – was not small and only Rs 17,000 crore had been recovered. It said the matter has been taken up by various high courts and even the Supreme Court.
SEBI directed FT on June 8 to return fund management fees worth Rs 451.63 crore to the investors of the six debt funds. It also levied a 12 percent interest fee on this amount, taking the total amount to be disgorged to Rs 512.5 crore.
Additionally, the regulator imposed a penalty of Rs 5 crore on Franklin Templeton India Asset Management Company for violating various SEBI rules and circulars such as investment and borrowing norms, code of conduct, and principles of fair valuation.
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