Thread by @barandbench

#SupremeCourt hears the Franklin Templeton case.

Solicitor General Tushar Mehta appears for SEBI

Justice Abdul Nazeer: there are some matters pending before us

Sr Adv AM Singhvi: There is no pending matter

SG: The very foundation of fundamental error is wrong. We want them to deposit the amount in escrow account. The interim order is wrong since only profits can be directed to be returned.

SG: The tribunal has grossly erred that they have failed to note that in terms of Regulation 12.1 of SEBI mutual funds, its not gross amount which is taken, In addition to management fees, the asset mgmt scheme may charge following expenses.

SG: Thus SAT has failed to calculate the actual expenses. taking amount as gross amount without calculating the AMC expenses in grossly wrong. Failure to follow categortisational circulars by SEBI was not followed

Securities Appellate Tribunal (SAT) has stayed Sebi’s order, whereby the regulator had barred the asset management firm from launching any new debt scheme for two years.

In addition, the regulator had asked Franklin Templeton to refund investment management and advisory fees to the tune of Rs 512 crore, including interest, collected with respect to its six debt schemes which are now shut.

SEBI is in the top court in appeal

#supremecourt

Sebi in its order had found that Franklin Templeton Asset Management (India) “committed serious lapses/violations with regard to a scheme categorization (by replicating high-risk strategy across several schemes) and calculation of Macaulay duration."

According to Sebi, serious lapses and violations appear to be a fallout of the Franklin Templeton AMC’s obsession to run high yield strategies without due regard from the concomitant risk dimensions
@SEBI_India #supremecourt

SG: based upon the statutory rules the amount of 512 crores was calculated and thus setting aside of this amount by SAT is erroneous.

#supremecourt #SAT @SEBI_India

Sr Adv Harish Salve for Franklin Templeton: this is the first appeal on facts and law

SG: On completely wrong law.

Sr Adv Harish Salve: we are not saying they have wrongly identified the branch of fees. the whole thing cannot be the income. at worse you can ask for profit.

Justice Nazeer: how did it come to 250 crore?

Salve: only 50 percent. Please read para 12

Salve: i can go into this and explain it. This is first appeal on facts and law. the appreciation of facts on which SAT order has been given is wrong.

Justice Nazeer: it was a first appeal before a competent authority?

Salve: pure interim order

Salve: SEBI misleads the court by saying similar matters are pending.

Justice Nazeer: in a money decree this is usually done when a part or percentage of amount is allowed to be paid.

SG: There is apower vested in the full time member. against his order an appeal lies. It was asked to deposit 512 crores.

Justice Nazeer: act provides for first appeal and thus it is wide open now

SG Mehta: it is not a stay of money decree but also a stay on what they are not permitted under Rule 7.1.1. when there are facts and statistics on how 512 figure is arrived at then if a part of the adjudicated amount is asked to be paid then it becomes a precedent.

SC: You seem to be more aggrieved by para 11 of the judgment regarding the new debt schemes. deposits are in escrow account and no one benefits from it.

SG: Then stay only this part of the order.

SC: We know what to happened to the 6 schemes. public should not be cheated.

Salve: no scheme is likely to be launched till appeal is heard.

Justice Nazeer: we record that no schemes will be launched till the appeal is decided

Singhvi: please record it.

SG: please stay para 11 of the SAT order

Justice Nazeer: we are disposing off this appeal itself. Mr Mehta you are all respected senior advocates of this bar.

Salve: there is a bar now on launching debt schemes

Justice Nazeer: no fresh schemes, as simple as that

ORDER

#supremecourt: We heard the parties. Mr Salve and Mr Singhvi submits that Franklin Templeton Asset Management India Pvt Ltd will not launch any new debt schemes till the disposal of appeal pending before SAT, Mumbai

SC: The submission is taken on record. We are not inclined to interfere with the order regarding the payment of 512 crores. Appeals are accordingly disposed off.4 weeks further time is given to SEBI before SAT , Mumbai. direct SAT to dispose off matter expeditiously as possible