Security Exchange Board of India has imposed a penalty of Rs. 15 Crore cumulatively on Franklin Templeton and 8 other entities, which is required to be paid within 45 days of receivingof such order.In April 2020, due to COVID-19 outbreak, the entity FT MF (Franklin Templeton Mutual Fund) had shuttered its six debt schemes stating the reason for the liquidity issue. The imposition of such penalty was done because of the violation of SEBIRegulations during managing different schemes of wound-uplast year.While passing such an order, the SEBI in its order stated, “The serious lapses and violationsclearly appear to be a fallout of FT MF’s obsession to run yield strategies without due regardfrom the concomitant risk dimensions. Ft mf ought to haverealisedthat the past track record inrespectof high-riskstrategies is noguarantee against futuremishaps.”It also emphasizes on the point of the blame game, which the entities shift from their mishap to black swan events, regulatory changes, etc. SEBI said that the entities should carefully andseriously introspect the notices and put robust risk control and due diligence mechanisms, given that the rest of the industry hasbeen able to cope with such events and have successfullysurvived during pandemic without reaching the winding up situation.
Against the order, the FT MF said that they are considering every option for their next step and has desired to appeal before the Securities Appellate Tribunal. They also stated that there is no violation as the company and its employees have acted in compliance with regulations while discharging their responsibilities, which are in best interest of unitholders.
The penalty is imposed on different services offered by the entity, in which SEBI directed Franklin Templeton Trustee Services Pvt Ltd to pay a fine of Rupees 3 crore and Franklin Asset Management India Pvt Ltd President Sanjay Sapre and Chief Investment Officer Santosh Kumar each to pay Rupees 2 crore fine.It has also imposed Rupees 1.5 crore penalty to be paid by eachfund manager’s personality of the Franklin Templeton at the timeof the violation, including Kunal Agarwal, Sumit Gupta,Pallab Roy, Sachin Padwal Desai and Umesh Sharma.
In addition, SEBI directed Rupees 50 Lakh penalty to be paid by Chief Compliance Officer Saurabh Gangrade.The market watchdog had directed the entities to pay suchamount within the 45 days of the receipt of the order to the defaulters, which is noted in its order.