Franklin MF moves SAT seeking stay on Sebi's Rs 5 crore penalty order

Tribunal to issue an order next week on whether plea can be admitted

Franklin Templeton Mutual Fund (FT MF) on Friday moved the Securities Appellate Tribunal (SAT) against a Sebi’s order dated June 7, which imposed a penalty of Rs 5 crore on the fund house and directed it to disgorge more than Rs 500 crore.
 

The fund house has sought a stay on the order until the tribunal hears all the arguments and gives its judgement. Sources said SAT will pass an order next week on whether the FT MF’s plea can be admitted.
 

In a 100-page order, Sebi has rapped the fund house for “several irregularities” in the running of its six debt schemes that were wound up in April 2020. The regulator has also directed the fund house to return over Rs 450 crore collected as 22-month investment management and advisory fees. Further it has imposed a two-year ban on launching new debt schemes for the alleged irregularities.
 

“The serious lapses and violations appear to be a fallout of the Noticee’s (FT MF’s) obsession to run high-yield strategies without due regard from the concomitant risk dimensions. The noticee ought to have realised that the past track record in respect of high–risk strategies is no guarantee against future mishaps. For a fund house which has been in this industry in India for over two and a half decades, it is surprising that its systems to monitor and manage critical risks like liquidity, credit and concentration are less than robust,” Sebi said in its order.
 

In a statement following the order, FT MF had said that it strongly disagreed with Sebi’s findings.
 

In a letter to investors, the fund house has defended its decision to wind up the six schemes, saying the current net asset value of the schemes is higher than what it was on April 23, 2020, when they were closed.