The high court was hearing the cases together and has asked all parties, including the Securities and Exchange Board of India (Sebi), to make their final submissions.

CFMA on Friday also said that it is contemplating filing a class action suit against Franklin Templeton global for recovery and to claim damages. It has urged all aggrieved investors to come together for filing the suit, “details of which will be announced soon”.

“We have not seen a copy of the First Information Report (FIR) and are not in a position to comment on specific details. The press release issued by CFMA citing the FIR, is replete with various misleading and baseless allegations, besides being inappropriate, as the matter is currently sub-judice,” said a Frankline Templeton spokesperson in an emailed response.

The company is not aware of the antecedents of CFMA, and as admitted by them in their original complaint, none of their members were unit holders in the six impacted schemes, the spokesperson added.

Templeton said that the schemes under winding up had received over Rs 7,184 crore from maturities.

Founded in 1947 in New York, Franklin Templeton is an American holding company that manages billions of dollars of its private, professional, and institutional investors. It has over 455 different open-ended mutual funds and 7 closed-end funds.

After years of working in the Indian market, the company witnessed a dramatic dip in liquidity, hence, it decided to close 6 funds, effective from Friday 4th May 2020. With this move, the company has effectively locked in Rs. 30,800 crore of investor money.In a statement released late last evening, the organization said the lockdown hurt liquidity in the corporate bond market.

It said this was the “only viable option to preserve value for investors and to enable an orderly and equitable exit”.

Sanjay Sapre, the President of the Indian unit of Franklin Templeton, said the assets of these funds would be handed over to an administrator.

The funds that have been closed are — Franklin India Low Duration, Franklin India Dynamic Accrual, Franklin India Credit Risk, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund, and Franklin India Income Opportunities Fund.

Financial adviser Surya Bhatia told GPN that investors will get money when maturities happen in respective portfolios and suggested against “over-reacting”.

As per the perspective of Franklin Templeton Asset Management India (FTAMIL) the Securities and Exchange Board of India (Sebi) rather than the Economic Offences Wing (EOW) – should deal with issues related to mutual fund investments. “We have the utmost respect for all statutory authorities, including EOW. However, we believe that Sebi, the specialised regulator for the securities market, is best placed to handle any issues related to mutual fund investments,” Templeton said in a note to unitholders on Monday.

Last week, the EOW of the Chennai Police registered a first information report (FIR) against FTAMIL and Franklin Templeton Trustee Services for an alleged criminal conspiracy to defraud 300,000 investors by causing wrongful loss to them and unlawful gain to themselves.

The FIR had also named Santosh Das Kamath, MD and chief investment officer, FTAMIL, Sanjay V Sapre, whole time member, FTAMIL, and their directors Jayaram Subramaniam Iyer, Vivek Kudva, RV Subramaniam, and Pradip P Shah, among others.

“Please do not believe unsubstantiated rumours and baseless accusations… Since the business has been carried out in compliance with the applicable laws and all decisions were taken in the best interest of our unit holders, we are confident about the outcome of any true and fair investigation conducted in this regard,” Templeton said, adding that the press release issued by Chennai Financial Markets & Accountability (CFMA) citing the FIR, was replete with various misleading and baseless allegations.

Templeton said that the schemes under winding up had received over Rs 7,184 crore from maturities, prepayments and coupons since April 24: “Four out of the six schemes are already cash positive. These amounts have been generated without the ability to efficiently monetise the portfolio.”

The note said that mutual fund assets of these schemes are held with Sebi-registered custodians and their portfolios retain value according to their respective NAVs, which are published daily based on the valuation of two independent valuation agencies. “The books of the six impacted schemes are regularly audited by internal auditors, statutory auditors, auditors appointed by the regulators and none of them have ever made any observation regarding misutilisation of funds by the schemes,” Templeton said.

The asset manager reiterated that it had acted in the best interest of unitholders and the aim was to return monies of wound-up schemes as soon as possible in accordance with the applicable regulations, and subject to the decision of the Karnataka High Court, which had completed hearing the arguments on this matter. ENDS

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