The Directorate of Enforcement (ED) is searching the residences of individuals linked to Franklin Templeton Asset Management (India) Pvt Ltd, sources said on March 16.
The agency, which is responsible for investigating foreign exchange and money laundering offences, was searching the premises of Vivek Kudva, former head of Asia-Pacific (APAC) distribution, and his wife Roopa Kudva. Roopa heads Omidyar Network, India, sources said.
Its team was also at the residence of Santosh Kamath, Chief Investing Officer-Fixed Income at Franklin Templeton Mutual Fund.
“We continue to cooperate with all regulatory and statutory authorities and provide all data and information required by them. Franklin Templeton places great emphasis on compliance with regulations, and we have appropriate policies in place, consistent with Indian regulations and global best practices,” Franklin Templeton Asset Management’s spokesperson said.
The raids are being conducted in connection with these officials withdrawing their personal money from some of the six debt schemes that Franklin Templeton India wound up suddenly in April 2020, sources said.
The capital market regulator Securities and Exchange Board of India (SEBI) in August 2021 found the fund house and the officials (including Kudva, Kamath and others) guilty of mismanagement of debt funds that led to the unceremonious and sudden winding up and locking away investors' money.
The ED is conducting the raids in connection with senior officials withdrawing their personal money from these schemes before the winding-up announcement was made public, sources said.
Kudva retired on July 28, 2022 after 16 years at the firm.
The agency is also looking to gather evidence as part of its investigation against the company and its promoters under the Prevention of Money Laundering Act (PMLA), as per reports.
Also read | The inside story of what led to the mess at Franklin Templeton
SEBI crackdown
In April 2020, Franklin Templeton shocked investors and the MF industry alike by winding up six of its debt schemes. It froze redemptions and said it would sell the underlying securities and return the money to investors.
The SEBI in an investigation found that Vivek Kudva, who was head of Europe, the Middle East and Africa (EMEA) at that point, and his wife Roopa withdrew Rs 30.70 crore from the six debt funds days before they were wound up.
SEBI also found the fund house, its trustee company, and eight other senior fund house officials, guilty of mismanagement of debt funds, in a series of detailed orders in August 2021. Kudva’s and his wife’s conduct was part of SEBI’s investigation.
The regulator imposed a penalty of Rs 5 crore on Franklin Templeton for “several irregularities” in the running of its six debt schemes. The fund house was asked to disgorge Rs 451 crore (Rs 512 crore after interest) it collected as investment management and advisory fees between June 2018 and April 2020.
SEBI also restricted Vivek and Roopa Kudva from accessing the securities market and from buying, selling or otherwise dealing in securities or being associated with the market in any manner for a year.
The Securities Appellate Tribunal (SAT) stayed the SEBI order banning Kudvas from accessing the capital markets.
Franklin Templeton MF also contested the orders at SAT, which is hearing the case.
Templeton's response
Franklin Templeton India said that in reference to the six schemes under winding up, as of March 16, 2023, these schemes have already distributed Rs 26,931.27 crore to unitholders, amounting to 106.81 percent of the aggregate reported AUM value as of April 23, 2020.
The amount disbursed, so far, ranges between 99.32 percent and 112.46 percent of the respective reported AUM values of the six funds as of April 23, 2020.
"At the time of each distribution, the Net Asset Value of each of the schemes was higher than it was on April 23, 2020. Further, five of the six funds have returned over 100% of the AUM at the time of the winding up decision on April 23, 2020. 4 out of 6 schemes have liquidated all performing securities and there is only one issuer with three performing securities remaining to be liquidated in the other two schemes," said the fund house's spokesperson.
