The Securities Appellate Tribunal (SAT) found the SEBI penalty on Franklin Templeton Asset Management Company (FT AMC) as ‘excessive’ as it did not account for the expenses borne by the fund house on managing the six wound-up schemes.
“…only profits could be directed to be refunded after deducting the necessary expenses actually incurred by the appellant (FT AMC) in managing the schemes. This factor has not been taken into consideration. Consequently, the direction to deposit Rs 512.50 crore appears to be excessive at this stage,” the SAT order read.
SEBI in its June 7, 2021, order had directed FT AMC 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. SAT has directed FT MF to deposit Rs 250 crore in an escrow account.
On June 4, 2018, FT MF had implemented the new categorisation norms, but SEBI found it didn’t stick to these rules in its wound-up schemes. On April 23, 2020, FT MF had decided to wind-up the six debt schemes.
No need to be barred from debt schemes
In its initial observations, SAT also found the SEBI order on barring FT AMC from launching new debt schemes as not necessary at this point.
The tribunal said that FT AMC is still managing 21 debt schemes, where no complaints have been raised indicating “poor management of the schemes”.
SAT also noted that FT AMC has been in the MF business for “more than two decades and some of the schemes have been in existence for more than ten years”.
So for the time being till SAT hears FT AMC’s appeal in more detail and various arguments made by all the involved parties, including SEBI, it has put stay on the two penalties imposed on FT AMC.
A Franklin Templeton spokesperson said, “With reference to the order issued by Whole Time Member of SEBI on June 7, 2021, Franklin Templeton Asset Management (India) Pvt. Ltd filed an appeal and an application for stay before the Hon’ble Securities Appellate Tribunal (SAT). After hearing the parties, the Hon’ble SAT has stayed the operation of the order passed by the WTM. The matter is listed on August 30, 2021 for further directions.”