The Enforcement Directorate (ED) is searching the residences of former and current executives of Franklin Templeton for alleged withdrawals from six debt schemes that closed in April 2020.
The people being searched on Thursday include chief investment officer Sanjay Sapre, former India president Santosh Kamath and former APAC distribution head Vivek Kudva, said sources.
“We continue to cooperate with all regulatory and statutory authorities and provide all data and information required by them. Franklin Templeton places great emphasis on compliance with regulations, and we have appropriate policies in place, consistent with Indian regulations and global best practices,” said a spokesperson of Franklin Templeton.
The Securities and Exchange Board of India (Sebi) in June 2021 barred Franklin Templeton Asset Management (India) from launching new debt schemes for two years and imposed a penalty of Rs 5 crore for violating regulatory norms in the winding up of six debt schemes in 2020.
Sebi said it had found that Franklin Templeton committed serious violations with relation to the six schemes.
The market watchdog directed the fund house to refund investment management and advisory fees of over Rs 512 crore (including interest) collected with respect to the six debt schemes.
A source in the company said the ED action will have no impact on current mutual fund schemes, citing that as of March 16 this year the six schemes have distributed Rs 26,931.27 crore to unitholders. The distributions amount to 106.81 per cent of the aggregate reported assets under management (AUM) value as of April 23, 2020, across the six schemes.
“The total amount disbursed so far ranges between 99.32% and 112.46% of the respective reported AUM values of the six funds as of April 23, 2020. At the time of each distribution, the Net Asset Value of each of the schemes was higher than it was on April 23, 2020. Further, five of the six funds have returned over 100% of the AUM at the time of the winding up decision on April 23, 2020. 4 out of 6 schemes have liquidated all performing securities and there is only one issuer with three performing securities remaining to be liquidated in the other two schemes,” said the company official.
In its order against Kudva and his wife, Sebi had imposed a cumulative penalty of Rs 7 crore and and ordered disgorgement of Rs 22 crore which accounts to nearly two-thirds of the amount redeemed by them before the closure of the schemes. They had redeemed units to the tune of Rs 30.70 crore.
However, the Securities Appellate Tribunal (SAT) stayed the one year ban imposed by the market regulator on the couple. The tribunal had continued the direction of depositing the disgorged amount in an escrew account.
