: Securities and Exchange Board of India (SEBI) on Monday imposed a cumulative fine of Rs 15 crore on nine entities, including Franklin Templeton Trustee Services, senior official and fund managers associated with the six debt schemes wound-up by the fund house.
In its latest action, the market regulator has issued a fine of Rs 3 crore on Franklin Templeton Trustee Services Pvt Ltd, and Rs 2 crore each on Franklin Asset Management (India) Pvt Ltd President Sanjay Sapre and its Chief Investment Officer Santosh Kamat.
It has also imposed a penalty of Rs 1.5 crore each on Kunal Agarwal, Sumit Gupta, Pallab Roy, Sachin Padwal Desai and Umesh Sharma, who acted as fund managers for various Franklin Templeton schemes at the time of violation. The watchdog has also fined erstwhile chief compliance officer Saurabh Gangrade Rs 50 lakh.
The monetary penalty has to be paid within 45 days from the receipt of the order, the SEBI said in its order. “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. The effectiveness of these systems stand compromised in the process of the noticee’s single-minded pursuit of reaping high yield,” the order read.
SEBI in its order noted that the noticees cited reasons of “business judgment” to defend “questionable decisions”, but these decisions which involve deployment of public funds are barely documented. The terms of investment covenants were apparently not in the interest of investors and the deficiencies in the agreements were sought to be corrected through a ‘commercial understanding’, the regulator added.
In its adjudication order, SEBI further said, “While it is easy to shift the blame for such mishaps onto black swan events, regulatory changes, etc, the noticees needs to seriously introspect and put in place robust risk control and due diligence mechanisms, given that the rest of the industry has been able to cope with the events and survive through the crisis period of the Covid-19 pandemic, without reaching the point of winding up.”
Note that earlier this month, SEBI imposed a hefty fine of Rs 5 crore on Franklin Templeton Mutual Fund (FT MF) for several wrongdoings in the running of its six debt schemes that were wound up in April 2020. The market regulator instructed the US-based fund house to refund Rs 451 crore (Rs 512 crore after simple interest) it collected as investment management and advisory fees between June 2018 and April 2020.
It is worth mentioning here that FTMF had shut the six debt schemes with assets around Rs 26,000 crore on April 23, 2020 after they faced unprecedented redemptions.
