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Franklin Templeton allays investors' fears after new debt fund ban

Reuters     June 10, 2021

Franklin Templeton India told investors on Wednesday that the market regulator's ban on its launching new debt funds would have no impact on existing funds that manage $8 billion in assets.

The Securities and Exchange Board of India (SEBI) on Monday barred Franklin from launching any new debt schemes for two years after a probe into its sudden closure of six credit funds last year found "serious lapses and violations."

Franklin has said it strongly disagreed with SEBI's order and planned to appeal it. In an e-mail to investors on Wednesday seen by Reuters, the fund house sought to reassure investors about any broader impact its other funds.

"I would like to clarify upfront, that the SEBI order has no impact on other schemes managed by Franklin," India President Sanjay Sapre said in the email.

Franklin continues to manage more than Rs 61,000 crore ($8.36 billion) for more than 20 lakh investors in India, he added.

Franklin has faced regulatory probes and court battles since April 2020 when it unexpectedly wound up six credit funds in India with assets of close to $4 billion, citing a lack of liquidity amid the coronavirus pandemic. Those funds had large exposure to higher-yielding, lower-rated credit securities.

In the Monday order, SEBI also ordered the fund house to refund investment and advisory fees, along with interest, of more than Rs 500 crore ($68.51 million), and fined the global giant another Rs 5 crore.

One senior fund manager, who declined to be named, told Reuters that money managers grew more cautious about investment decisions after the SEBI order.

"SEBI now is not leaving any room for any deviation and it's becoming very strict ... there is a heightened level of alertness and attention that has come," the manager said.

Also read: Franklin Templeton MF unitholders to get Rs 3,205 crore in fourth tranche


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