Franklin Templeton on Friday issued an apology to the Securities and Exchange Board of India (Sebi) for remarks made by its global chief that regulatory tightening caused the winding up of its schemes.
The fund house said the remarks made during its quarterly earnings call by Jenny Johnson, president and CEO of Franklin Templeton, were quoted “out of context”.
“We deeply regret any unintended slight this may have caused to the esteemed offices of Sebi, whom we have always held in the highest regard, and unconditionally apologise for the same,” said Sanjay Sapre, president of Franklin Templeton AMC, the India arm.
During an analysts call on Wednesday, Johnson had said: “Unfortunately, Sebi came out with new guidelines stating any investment in unlisted instruments of funds can’t have more than 10 per cent in a fund, and you can’t trade them. So that orphaned about a third of our fund there.”
The fund house said it regretted the misunderstanding caused by the remarks.
“In response to a question regarding the winding up of six schemes offered in India, Johnson provided a general background concerning Franklin Templeton’s experience in India as it existed before Covid-19. Reference to the regulations around unlisted securities was intended to be a part of these background statements to provide a context to an audience unfamiliar with Indian markets,” the fund house said in a statement.
Franklin further said the primary reason behind the wind-up was “severe market dislocation caused by the Covid-19 pandemic, and the related lockdown that led to severe market illiquidity, particularly for papers rated below AAA, combined with heightened redemptions during this period.”
Stung by the comments, Sebi on Thursday issued a press release defending the new rules it had introduced in October. It also advised Franklin to return investors’ money stuck in the six schemes, and implied that the fund house had not followed good investment practices.
“It was observed that unlisted debt securities, particularly bespoke securities in which only a single investor invested, suffered from both forms of opaqueness — opaqueness of structure and true nature of risk on the one hand, and lack of ongoing disclosure in respect of financials of the issuer on the other,” Sebi said in a statement.
Sapre added: “Franklin Templeton has a long history of over 25 years in India, where a third of our global workforce is based, and the firm remains fully committed to our clients and our business in India.”