Sebi found that the fund house had formed an Investment Committee as an informal group. The committee had discharged its function and its deliberations were recorded by way of minutes of a meeting.
However, the minutes did not include the names of persons who were invited, attended and sought leave of absence in that meeting and also the signatories on the minutes are not identified with names.
Sebi said the company had included name of international CIO as a member of investment committee as first person on the panel.
Inclusion of international CIO in the investment committee itself entitles him to participate in deliberation of the committee whose functions include performance review of portfolio holdings, peer group review, policy deviation and as such, he is either directly or indirectly involved in the operation of the AMC sitting out of India, which is in violation of Sebi rules, the regulator noted.
According to Sebi rules, an asset management company (AMC) can not carry out its operations including trading desk, unit holder servicing and investment operations outside the territory of India.
"I find that Franklin Templeton Mutual Fund, Franklin Templeton Trustee Services Pvt Ltd and Franklin Templeton Asset Management (I) Private Ltd are found guilty of constituting an informal group as investment committee and inclusion of international CIO in the investment committee is in violation of... Sebi MF regulation," Sebi Adjudicating Officer Nagendraa Parakh said.
Accordingly, Sebi has imposed a penalty of Rs 10 lakh on Franklin Templeton Mutual Fund, Franklin Templeton Trustee Services Pvt Ltd and Franklin Templeton Asset Management (I) Pvt. This penalty would have to be paid jointly and/or severally by them.
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