Thread by @barandbench

Franklin Templeton hearing to resume today before Supreme Court bench of Justices S Abdul Nazeer and Sanjiv Khanna

#FranklinTempleton

Hearing commences.

Senior Counsel Harish Salve starts submissions.

Salve says that a lot misleading of allegations have been made including the one that we violated SEBI cap. We will address all that: Salve

What is the legal regime for investments. Regulations 43 and 44 are the statutory basis on which investments are to be made: Salve

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They confuse value of investments with quality of investments made, Salve says referring to Regulation 43.

Nobody has claimed we have breached 10 percent of NAV: Salve

One fund does better than another because of algorithm. SEBI can pulls us up saying course correction is needed. But otherwise we can't be asked to disclose algorithm: Salve

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Salve referring to Regulation which says Mutual Fund scheme shall not invest in unlisted debt instruments except government securities and other money market instruments.

#franklintempleton

There is a full definition for 'non traded'. If you are not traded for 30 days, then it is 'non traded.'

Their argument is if there are excellent debt securities which are non traded, then you can't invest in that but if there is thinly traded then you can invest in that: Salve

Bench rises for lunch. Hearing to resume at 2 pm.

#franklintempleton

Hearing resumes

Senior Advocate Harish Salve: SEBI is entitled to see my proprietary model is illegal or not but I don't want it to be made public.

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Salve: Higher the risk you take the higher return you will get. Question is how you determine the credit risk. For valuation purpose to determine risk, one will stick to the matrix.

Salve: this is a sensitive situation. You want to safeguard investors but not have run on the market.
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Salve: Let us now discuss the Macaulay circular. Look at the Macaulay time span now.

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Salve: duration calculation may help in structuring your portfolio. Or Macaulay duration is done by external agency for us.

Salve: If all this was legally compliant what went wrong? Not all schemes malfunctioned. RBI stated heightened volatility on investment schemes due to COVID 19 has put pressure on high risk debt mutual fund schemes

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Salve: when lockdown was announced there was uncertainty and gloom. Look at airlines, all have to be financed. Most of their loans have to be written off. Everybody will have to reset button

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Salve: Maruti, PVR cinemas, Starbucks have invoked force majeure to defer payments. Imagine the condition of the market
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Salve: Digital companies made all the money. Netflix valuation went from 1 billion from 5 billion dollars. Bharti and TATA often give non credit securities but there they is not a risk. Despite risk people prefer TATA etc because they get more interest.

Asset management company does not make money from the value of portfolio. They make money from managing assets. It's counterintuitive. Winding up is not an easy decision and it's not that we gained anything.

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Salve: everyone is trying to teach a lesson to SEBI. Court can hear a challenge from an investor who had been shortchanged after sebi hears the case. But let SEBI do its job. Let not the super regulators intervene who is making tongue in cheek allegations

Matter to continue on March 1.

Details of continuing schemes of #FranklinTempleton to be placed on record.