The financial markets regulator SEBI, on Monday, decided to stop Franklin Templeton Asset Management Company from launching any new debt schemes for a time period of two years. In addition, a fine of Rs 5 crore has been slapped on the fund house. The action has been taken after Franklin closed down six debt schemes last year which SEBI says is a violation of its regulations.
According to the order issued by the Securities and Exchange Board of India(SEBI), Franklin Templeton Mutual Fund has violated several provisions of the Mutual Fund Regulations in addition to some circulars issued by the regulator. “As a result of the irregularities in the running of the debt schemes inspected, loss has been caused to the investors,” the order pronounced by SEBI’s whole-time member G. Mahalingam read.
In view of these violations, Franklin will have to return the investment management and advisory fee of Rs 512 crore with interest. The SEBI has, in accordance with Section 15I of the SEBI Act, imposed a penalty of Rs 5 crore on the firm. The penalty will have to be paid within 45 days since the order got issued.
Vivek Kudva, the former head of Franklin Templeton Asia Pacific, and his wife, Rupa, have also been punished by the regulator. They will be banned from the securities market for one year and will have to transfer Rs 30.70 crore(of redeemed Franklin units) to an escrow account within 45 days. Penalties of Rs 4 crore and Rs 3 crore have been imposed on Vivek and Rupa respectively.
In addition, adjunction proceedings will be started against the chief executive officer, chief compliance officer and the director of Franklin Templeton, among other employees.
The unitholders of the six debt schemes closed down by Franklin Templeton Asset Management Company last year will get Rs 3,205.25 crore from Monday onwards, according to a letter the company’s CEO wrote to the investors.