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Distributors of Franklin Templeton’s wound up debt schemes await their commission

The initial understanding among distributors was that they might get their commissions as investors start to receive their dues, but that has not been the case

May 03, 2021 / 02:43 PM IST

Distributors of the schemes of Franklin Templeton (FT) are miffed with the fund house as their commissions for the six wound-up schemes (of last year) still remain unpaid. Noticing that investors have started getting their money back, following the Supreme Court order in February, 2021, distributors who had sold those schemes are of the opinion that they too should now start receiving their commissions.

Now, distributors claim that they ought to be getting their commissions for the wound-up schemes as handholding and counselling their clients – whose money has been stuck in these funds – updating them on developments has been a tough task so far.

Demanding dues

“We have been regularly communicating with clients to keep them up-to-date on their Franklin investments. Clients have not lost money in these schemes and are now gradually getting back their dues…most of the investments in Franklin debt schemes were for the long-term,” says Dhruv Mehta, chairman, Sapient Wealth Advisors and Brokers and chairman of the Foundation of Independent Financial Advisors.

Distributors say FT MF has not released the commissions after it decided to wind-up the six debt schemes in April last year, citing high redemptions and dip in trading volumes in the debt market due to COVID-19.

Close

Some unitholders moved the courts to challenge the decision to wind up. Eventually, the Supreme Court intervened to give directions on how investors could get back their money stuck in the six shut schemes.

The initial understanding among distributors was that they might get their commissions as investors start to receive their dues, but that has not been the case.

A query sent to Franklin Templeton did not elicit any response till the time of publishing.

FT MF is yet to officially inform distributors on when these commissions would be paid to them.

“Under which provision of SEBI regulations can distributors’ commissions be held back if a scheme is wound-up?” asks Poornima Katpadi, founder of Simple Solution 4u. She says that some distributors have a large pie of their clients’ money in Franklin schemes. A large share of a distributor’s assets stuck with a fund house means a large chunk of that distributor’s income – by way of trail fees – also gets stuck with the fund house.

The regulator SEBI’s stance will give much-needed clarity and set precedence for future, other distributors say.

“The commissions can be released after investors get back their entire investments,” says a distributor, requesting anonymity.

After waiting for nearly a year, investors received the first instalment of Rs 9,121 crore of their investments in February, 2021.

Investors to get third instalment this week

SBI MF will distribute Rs 2,488 crore to unitholders of the six FT mutual fund schemes. The payments will be made to unitholders who are KYC-compliant, proportionate to the units held by them.

This will be the third instalment, since SBI MF took charge  of selling the securities in the wound up Franklin Templeton schemes following Supreme Court’s direction.

After these payments, the six FT MF schemes would have distributed Rs 14,572 crore back to unitholders.

In the last such instalment in April, 2021, investors received Rs 2,962 crore.
Jash Kriplani is a journalist with over ten years of experience. Based in Mumbai. Covering mutual funds, personal finance. His last stint was with Business Standard, where he covered mutual funds and other developments in the financial markets
first published: May 3, 2021 02:43 pm

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