RTI reply raises question over Franklin Templeton's wind-up move

Sebi said it had not given any prior permission to the fund house

The right to information (RTI) query filed by Khambatta family investors before the Securities and Exchange Board of India (Sebi) has raised question on the wind-up decision taken by Franklin Templeton Mutual Fund (Franklin MF), as the regulator in its reply said that it had not granted any permission.  

In the RTI query, the investor claimed Franklin Templeton in its application before the Gujarat High Court and in the special leave petition filed before the Supreme Court (SC) had claimed winding up of the six schemes took place after taking appropriate permission from Sebi.

Franklin Templeton MF said: “We have not made any statement before the Hon’ble High Gujarat High Court or Hon’ble Supreme Court about Sebi granting us prior permission to wind up these six schemes. As clearly stated in all our communications, the decision to wind up these schemes was taken in accordance with Regulation 39(2)(a).”

“We continue to follow due process, both in making investment decisions and with regard to the winding up of the funds and remain committed to following the regulations in all respects. The matter is sub-judice and we urge our investors and partners not to be swayed by incorrect and misleading statements,” it added.

According to earlier media reports, Vivek Kudva, Franklin Templeton group’s managing director, on an investor call, had said: “We did have extended engagement with the regulator on this and the regulator is (was) also very co-operative. Sebi has been wonderful; they also saw reason...that the best option would be to wind up the fund. It's a very thoughtful decision not taken in haste.”

At present, the matter pertaining to the wind-up of the six debt schemes of FT MF and investors’ grievances is being heard in the Karnataka Hig Court.

The hearings are likely to weigh various aspects of the matter, including the current regulatory framework on wind-up of schemes, and whether all the regulatory provisions were followed and was there a need to take a prior approval from Sebi.

The six wind-up schemes of Franklin MF have so far received Rs 6,072 crore in payments and pre-payments from underlying bonds. The fund house is yet to start the refund process as the e-voting by unitholders has got stayed with matter being sub-judice.