Sunday, April 18

Willing to take consent from unitholders: Franklin Templeton

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Franklin Templeton, which decided to abruptly shut six of its Indian funds citing illiquidity in April, has told the markets regulator that it will comply with a high court order to seek consent from its unitholders even as it challenged the ruling, according to its plea filed in the Supreme Court (SC).

Franklin Templeton Trustee Services Pvt. Ltd, which initially argued that mutual funds (MFs) are empowered to wind up schemes without unitholders’ consent, asked Sebi for permission to hold a vote on the issue on November 8. However, the regulator on November 10 directed the asset manager to seek clarifications from the Karnataka high court on restrictions on redemptions and on whether the schemes would remain closed till the vote is completed.

The Karnataka HC stayed its judgement till December 5, allowing Franklin Templeton time for an appeal to the apex court. It also restricted redemptions till that date. A liquidity crisis in sparsely traded high-yield bonds following the announcement of a nationwide lockdown in end-March forced Franklin to wind up the six schemes, locking ₹26,000 crore of investor funds.

The petition filed by Franklin Templeton in the SC on November 23 outlines the request to Sebi and proposes an electronic vote to be held from November 30 to December 2.

A DATE Mint email to Franklin on whether it has approached the high court was not answered. However, Sanjay Sapre, president of Franklin Templeton MF, said in a November 23 letter that the asset manager considered all possible options to start returning money to unitholders in the shortest possible time, including seeking unitholders’ consent.

Stating that the law does not envisage any permission from Sebi before seeking the vote from unitholders, Paritosh R Gupta of Gupta Law Associates, the advocate representing the members of the Khambatta family who are parties to the case, said “Mere issuance of an email to Sebi and complete inaction thereafter shows they were never serious about it.”