Franklin Templeton Audit Report Finds Several Wrongdoings by Key Management Personnel: Report
A forensic audit has indicated several wrongdoings, including insider trading, by the key management personnel of Franklin Templeton Asset Management (India), says a report from Moneycontrol.
 
The report says, "Certain key officials of the fund had redeemed their personal investments just before the formal announcement of the closure of six debt schemes and made money during that time, the audit report by Choksi & Choksi pointed out."
 
"The Choksi & Choksi report indicates that the fund gave favours to certain companies it had invested in by not exercising the put option, despite the suggestions given by the risk management committee to its chief investment officer (CIO) to do so," the report says.
 
Quoting sources, the report says, market regulator Securities & Exchange Board of India (SEBI) may look into these redemptions from the perspective of insider trading regulations.
 
On 23 April 2020, Franklin Templeton had announced shutting down six debt schemes due topoor and illiquid investments amid the coronavirus crisis, leaving lakhs of investors in the lurch. The total assets under management (AUM) of the six schemes were over Rs25,000 crore, spread across Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund. (Read: Rs30,000 Crore Stuck in Franklin India Proves Why Debt MF Scheme Categories Are Not Worth the Risk)
 
Subsequently in May 2020, Franklin Templeton’s global CEO Jennifer M Johnson blamed markets regulator Securities and Exchange Board of India's (SEBI’s) October 2019 decision to allow mutual funds to invest only 10% in unlisted instruments, as one of the reasons for closing down these six schemes.
 
Meanwhile, Chennai Financial Markets and Accountability (CFMA), an investor group, is contemplating filing a class-action suit against Franklin Templeton Mutual Fund (FTMF) for recovery of money and to claim damages, says a senior office-bearer.
 
Manoj K Sheth, president of CFMA, while speaking with Moneylife, says, "We are collecting information from investors and would file the class action suit against FTMF in Madras High Court. We have received information from about 300 investors till date and more would be joining the suit soon."
 
"If no timely corrective action is taken, then the risk is exposing three crore investors with risk exposure of Rs26 lakh crore who will have no faith in the terminology called “investor protection” or “mutual fund sahi hain!" he added. (Read: Franklin Templeton Debt MF Schemes: Chennai-based CFMA Gets Ready to File Class Action Suit)
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    COMMENTS

    prasad.talasila

    3 weeks ago

    The moneycontrol article mentioned above doesn't provide a link to copy of the forensic audit report. If this report is in the public domain, kindly provide an access to the same or provide a link to an online report. Thanks.

    drsreerajr

    3 weeks ago

    Mutual funds sahi NAHI hai , these fund houses are proving it time n again

    Franklin Templeton Debt MF Schemes: Chennai-based CFMA Gets Ready To File Class Action Suit
    The Chennai Financial Markets and Accountability (CFMA), an investor group, is contemplating filing a class-action suit against Franklin Templeton Mutual Fund (FTMF) for recovery of money and to claim damages, says a senior office bearer.
     
    Manoj K Sheth, president of CFMA, while speaking with Moneylife, says, "We are collecting information from investors and would file the class action suit against FTMF in Madras High Court. We have received information from about 300 investors till date and more would be joining the suit soon."
     
    "If no timely corrective action is taken, then the risk is exposing three crore investors with risk exposure of Rs26 lakh crore who will have no faith in the terminology called “investor protection” or “mutual fund sahi hain!" he added.
     
    The CFMA website http://cfma.in is collecting information from FTMF investors and also guiding all those investors who are interested in recovering their lost money, Mr Sheth says.
     
    On 23 April 2020, Franklin Templeton had announced shutting down six debt fund schemes due poor and illiquid investments amid the coronavirus crisis, leaving lakhs of investors in a lurch. The total assets under management (AUM) of the six funds were over Rs25,000 crore, spread across Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund. (Read: Rs30,000 Crore Stuck in Franklin India Proves Why Debt MF Scheme Categories Are Not Worth the Risk)
     
    Subsequently in May 2020, Franklin Templeton’s global CEO Jennifer M Johnson blamed markets regulator Securities and Exchange Board of India's (SEBI’s) October 2019 decision to allow mutual funds to invest only 10% in unlisted instruments, as one of the reasons for closing down these six schemes.
     
    CFMA, a society to protect the interests of investors, was the first to oppose the Franklin Templeton move to abruptly close its six debt schemes and filed a public interest litigation (PIL) in Madras High Court.
     
    According to CFMA, investors all over the country are now demanding their money back especially when Franklin Templeton had claimed that two of the funds, Franklin India Low Duration Fund and Franklin India Credit Risk Fund turned cash-positive on 31 August 2020. Since then, the six schemes have received over Rs6,486 crore.
     
    Earlier this week, the Chennai-based investor group had accused the Association of Mutual Funds in India (AMFI), a nodal association of mutual funds across India, of protecting Franklin Templeton and its senior management against the FIR filed with Economic Offences Wing (EOW).
     
    Recently, Coimbatore-based investors, Premnath Shanker and Usha Premnath, also joined CFMA by filing a complaint with EOW asking for investigation in the Franklin Templeton stating that they had also been cheated by FTMF of Rs49.47 lakh.
     
    The CFMA alleged that the AMFI, the body that claims to protect and promote the interests of mutual funds and their unitholders, has been a mute spectator ever since the FTMF issue broke in April this year, and has now suddenly rushed to defend the indefensible fund house by calling an FIR registered against it as 'dangerous and undesirable precedent'.
     
    Last week, the EOW of the Chennai Police has registered a first information report (FIR) against beleaguered Franklin Templeton Asset Management India (FTAMIL), Franklin Templeton Trustee Services (FTTSPL) and top executives of the AMC for an alleged criminal conspiracy to defraud three lakh investors by causing wrongful loss to them and unlawful gain to themselves.
     
    Top executives named in the FIR include Santosh Das Kamath, managing director (MD) and chief investment officer (CIO) of FTAMIL, Sanjay V Sapre, whole time member of FTAMIL, and their directors Jayaram Subramaniam Iyer, Vivek Kudva, RV Subramaniam, and Pradip P Shah, among others.
     
    CFMA says, "AMFI is undermining a lawfully registered FIR against FTMF when it is not even privy to either forensic audit report or the internal management of FTMF unless Mr Sapre, the representative of FTMF, has briefed AMFI with sketchy details and said 'mutual fund sahi hai and sab kuch sahi hain'."
     
    Mr Sheth from CFMA says it is rather intriguing as to why AMFI showed a complete lack of interest towards the pain and suffering of three lakh unit holders and remained a mute spectator during the entire proceedings in the last six months but have now suddenly sprang up against FIR being registered against Franklin Templeton. 
     
    "This exposes AMFI’s complete lack of empathy towards the investors whose over Rs28,000 crore is stuck. In doing so, AMFI is going against its very core objective of being a self-regulatory organisation-SRO," he says.
     
    Earlier, on 3 June 2020, the Gujarat High Court had stayed Franklin Templeton's e-vote on liquidation of debt schemes that was scheduled to be held from 9th June to 11 June 2020 and ordered SEBI to put their forensic report in public domain. However, CFMA says this has not yet been complied with. 
     
    After the direction from Gujarat HC, the mutual fund house filed a special leave petition (SLP) before the Supreme Court seeking a stay. However, on 19th June, the apex court dismissed the SLP and refused to vacate the stay. Instead, the SC transferred all the petitions related to the case to the Karnataka High Court asking the HC to decide the matter in three months. (Read: SC refuses to vacate stay on Franklin Templeton's e-voting)  
     
    A query filed under the Right to Information (RTI) also revealed that Franklin Templeton did not take any approval from the market regulator before winding up its six debt schemes. The information was sought by Ahmedabad-based Areez Khambatta, the owner of soft drink maker Rasna, and his wife, Persis Khambatta. A trust promoted by them had filed a plea in Gujarat High Court, seeking a stay on the liquidation process of the six debt schemes of Franklin Templeton.
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    COMMENTS

    Newme

    4 weeks ago

    I read this comment on Instagram. \"Only a 10th Std fail will invest in Stock Market through mutual funds in this age of internet and smart phone. Study the market and invest on your own. If you can select the right mutual fund then you are capable of selecting the right stocks\". Though harsh I feel not a wrong comment.

    ganesanjaicare

    4 weeks ago

    arrest warrant is the correct remedy and non bailable.

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