Templeton Apologises To Market Regulator Sebi, Says CEO Was Misquoted

Franklin Templeton said Ms Johnson gave a general background of the fund house’s experience in India

Highlights

  • Committed to returning investor money, says US-based Franklin Templeton
  • Severe market dislocation main reason for move on 6 funds, it adds
  • Last month, US-based Franklin shut six India funds citing illiquidity

US-based Franklin Templeton on Friday issued an apology to capital market regulator Securities and Exchange Board of India (Sebi) for any misunderstanding over the closure of six of its schemes in the country, and said it is committed to returning the investors’ money. “We deeply regret any unintended slight this may have caused to the esteemed offices of SEBI whom we have always held in the highest regard and unconditionally apologise for the same,” said Mumbai-based Franklin Templeton Mutual Fund, which shut six of its funds in the country three weeks ago citing severe market dislocation and illiquidity caused due to the coronavirus (COVID-19) pandemic. The sudden move by one of the first global financial firms to launch asset management operations in the country more than two decades ago had caused a turmoil in the markets, forcing the central bank to intervene and announce a special Rs 50,000-crore window to support the mutual funds industry.

Here are 10 things to know:

  1. “Working closely with the Trustees, the firm is committed to ensuring an orderly and equitable exit for all investors at the earlier possible time,” Franklin Templeton said on Friday. 

  2. The statement from Franklin Templeton came a day after Sebi rebutted claims that tighter rules pushed the US-based fund house into freezing the six debt funds last month, and said the asset manager should focus on returning the $4.1 billion to investors.

  3. News agency Bloomberg had earlier quoted Franklin Templeton’s global CEO Jennifer Johnson as saying at a post-earnings conference call that the country’s new rules on investment in unlisted debt had orphaned a third of their funds as these bonds could no longer be traded.

  4. The new regulations were enforced after the collapse of a major infrastructure financier in September 2018, Sebi said on Thursday. The regulator also said the rules were created by a committee that included representation from Franklin Templeton.

  5. In its statement on Friday, Franklin Templeton said that Ms Johnson, while responding to a question regarding the closure of the schemes, had provided general background of the company’s experience in the country’s market before the onset of the COVID-19 outbreak.

  6. Franklin Templeton said the CEO was quoted out of context and this had diluted the essence of her responses. “This is neither factually correct nor substantiated by the comments made during the conference,” Franklin Templeton said in the media release.

  7. Franklin Templeton went on to clarify that the primary reason for the winding up of the schemes was the severe market dislocation caused by the COVID-19 pandemic and the related lockdown, which had led to severe market illiquidity and increased redemptions.

  8. In its April 23 statement, the US-based fund house said it had wound up six funds “to protect value for investors via a managed sale of the portfolio”. The funds were 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.

  9. Days later, the Reserve Bank of India (RBI) announced a special liquidity facility worth Rs 50,000 crore for mutual funds in a bid to ease liquidity pressures in the sector as well as lift investors’ confidence. The RBI mentioned that heightened volatility in the country’s capital markets in reaction to the COVID-19 outbreak had imposed liquidity strains on mutual funds. 

  10. The government has already announced a spending package of Rs 1.7 lakh crore, whereas the central bank has cut key interest rates and conducted targeted long-term repo operations to ease liquidity in the system. The number of coronavirus cases in the country has increased by 14 per cent in the past two days to 56,342, with 1,783 fatalities, according to the latest official data.

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