Sebi penalises Franklin Templeton associate company

SEBI headquarters (Representative image)

The Securities and Exchange Board of India (Sebi), in an order issued on June 14, imposed a penalty of Rs 5 crore on Mywish Marketplaces, an associate company of Franklin Templeton Asset Management Company (FTAMC).

The penalty has been levied on the company on charges that, as Vivek Kudva was director of the company, it had information that was not in the public domain and could redeem its investments before the decision to wind up the debt schemes was taken in April 2020.

Vivek Kudva, head of Franklin Templeton Asia Pacific (APAC), was director in Mywish Marketplaces, as pointed out by the forensic audit of the wound-up schemes. Alok Sethi, director, FT-trustee, was also a director in Mywish Marketplaces.

Also Read: SEBI fines Franklin Templeton's CEO, fund managers, trustees and compliance officers

The audit report found that there was a presentation on concentration and liquidity risk in securities in debt schemes in the AMC Board and Trustee meeting held on March 6, 2020, which was attended by Kudva in his capacity as director, FT-AMC.

The report says Kudva was privy to information such as concerns on redemption, concentration and liquidity risk due to stress in the debt schemes, “most of which was not in public domain”.

The Sebi order also carries the explanations made by Mywish Marketplaces. In some of these responses, the company says that the withdrawals were being made to pay salaries of its employees, and the stress faced by the debt holdings of FT MF schemes also triggered these withdrawals.

The company has cited stress in some of the debt investments such as YES Bank, Vodafone Idea and Essel Infraprojects.

The order said that the company had certain information that gave it an unfair advantage over other investors, “who remained invested and were subsequently left in the lurch as their investments were locked up for a considerable amount of time”.

The order added that the penalty will act as a deterrent for the company and others in protecting the interest of investors in the securities market.

“The primary purpose for having laws prohibiting trading on the basis of asymmetric access to information is to foster confidence in the securities markets. Prevalence of such trades erodes the confidence of the ordinary investors in the fairness and integrity of the securities markets,” the order pointed out.