On Monday, the Securities and Exchange Board of India came out with two orders, holding Franklin Templeton India guilty of serious lapses in the way it ran its fixed income schemes and a senior executive guilty of failing to perform his fiduciary duty.
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The AMC has been held guilty of doing bare minimum in terms of adhering to the spirit of SEBI norms and having one-sided deals with corporates at the expense of investors. Its strategy of investing in securities that were bespoke, opaque and high risk played a large part.
The capital markets regulator has barred the fund house from launching any new debt scheme for a period of two years, levying a penalty of Rs 5 crore on it for various infractions and directed it to refund the monies collected as fund management fees along with interest.
SEBI’s order is a warning to the country’s mutual fund industry. The caution is not just for the funds and the practices that they pull off by adding a footnote with an asterix that says “mutual funds are subject to market risks”, but also a reminder to investors.
SEBI’s action holds out hope that investors’ interests, which it is supposed to safeguard, are not at the mercy of risk-happy fund managers. It tells investors that the fate of 300,000 FT investors is not the rule. It’s the exception.
✍️ @jaysh88
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✍️ @jaysh88
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