Franklin Templeton MF: Top Management Ignored Warning Signals, Including on Risk Management, Says Report
While the sudden closure of six debt schemes by Franklin Templeton Mutual Fund (FTMF) has come as a shocker for its investors, an analysis of the final forensic audit report by a news portal reveals interference in risk management, liquidity issues, deficient investment policy, use of inter scheme transfers (ISTs) for managing the liquidity, neglect towards early warning and miscalculation of Macaulay duration of portfolios among others.
In its analysis, Moneycontrol says
, "Now that the six schemes are under winding up with SBI Funds Management with a commitment to return monies in the best possible way, it is a sense of relief for investors. The focus now needs to shift on the facts of the case, putting out these facts to the investors and the Supreme Court and pinning of responsibilities. More so it is imperative for Securities and Exchange Board of India (SEBI) to ensure that in the future such a situation is avoided.
"The guiding principle has to be that value of money is only if you are able to use it when you need it. Every investor saves for a rainy day and when the rainy day comes, if we were to lock-in access to these funds, what is the point of saving?" the report says.
According to the report, in July 2019, the head of risk management at FTMF sent a presentation, which incorporated concerns with respect to holding in debt securities of certain issuers such as YES Bank, DHFL, and Vodafone in the debt schemes. However, following concerns raised by chief investment officer (CIO) of FTMF, and nod from the seniors, the initial concerns raised on the debt securities of these certain issuers were excluded from presentation sent by the head of risk management.
"The above sequence of events demonstrates how there was interference and exclusion of concerns of the risk management leading to risk not being a truly independent function within the Franklin Templeton India entity," the report says.
Earlier this month, a Supreme Court bench, comprising justices S Abdul Nazeer and Sanjiv Khanna, has clarified that SBI Fund Management, and not SBI Mutual Funds, will be responsible for distribution of Rs9,122 crore to unit-holders of the six wound-up Franklin Templeton schemes...Continue Reading...
On 2nd February, the Supreme Court had directed FTMF to distribute Rs9,122 crore among unit-holders of the six schemes that were shut by the mutual fund house in April last year and said the distribution of funds need to be undertaken by the SBI Mutual Fund and completed within 20 days.
The apex court had said the unit-holders should be repaid in proportion to their respective share in assets of the scheme and the distribution of funds would be undertaken by SBI Mutual Funds as agreed by both Franklin Templeton Trust and SEBI.