The Supreme Court (SC) on July 26, 2021, allowed Securities Appellate Tribunal’s direction to Franklin Templeton MF (FT MF) to deposit Rs 250 crore in an escrow account to continue, instead of Rs 512 crore as earlier directed by SEBI.
SAT had found the SEBI penalty on FT MF as ‘excessive’ as it did not account for the expenses borne by the fund house on managing the six wound-up schemes. So, SAT directed FT MF to deposit Rs 250 crore in an escrow account till the case is heard and disposed.
SEBI in its June 7, 2021, order had directed FT MF to credit the investment management and advisory fees it had garnered between June 4, 2018 and April 23, 2020, to the six wound-up debt schemes. The total amount came up to Rs 512 crore.
The market regulator had also barred FT MF from launching any new debt schemes for a period of two years. However, SAT had set aside this order.
This prompted SEBI to move SC against SAT’s directions.
While hearing the matter, FT MF told SC that it will not launch any new debt scheme before the matter is fully heard and disposed by SAT.
FT MF’s legal troubles
FT MF’s decision to wind-up six of its debt schemes in April, 2020, embroiled the fund house in multiple legal cases.
After unitholders filed cases, SEBI also started its own investigation on the events leading up to wind-up and whether FT MF managed the schemes in accordance with the existing regulations.
In June, 2021, SEBI released its order, finding several violations in how FT MF managed these schemes and imposed penalties on the fund house, as well as certain executives.
After this the fund house approached SAT. Meanwhile, the fund house has been fighting case on the interpretation of the wind-up regulations.
FT MF’s stance had been that trustees’ approval is enough to wind-up the schemes.
However, SC in another order on July 14, 2021, upheld that unitholders’
approval was required when winding-up the schemes.