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."