"Public should not be cheated," Supreme Court says as Franklin Templeton undertakes not to launch any new debt schemes till SAT appeal is decided

The Supreme Court on Monday refused to interfere with the order of the Securities Appellate Tribunal (SAT) which had stayed the order of the whole time member of Securities Exchange Board of India (SEBI) barring Franklin Templeton Asset Management (India) from launching any new debt schemes for two years..The Bench of Justices Abdul Nazeer and Krishna Murari today took on record a submission made by Franklin Templeton that it would not launch any new debt schemes till the pendency of the appeal before SAT, Mumbai..SEBI 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 shut down last year..In its order, SEBI found that Franklin Templeton “committed serious lapses/violations with regard to a scheme categorization (by replicating high risk strategy across several schemes) and calculation of Macaulay duration (to push long term papers into short duration schemes).”However, the SAT had stayed this order. .Appearing for SEBI today, Solicitor General Tushar Mehta submitted, "It is not a stay of money decree, but also a stay on what they are not permitted...when there are facts and statistics on how Rs 512 crore figure is arrived at, then if a part of the adjudicated amount is asked to be paid, then it becomes a precedent.".However, Senior Advocate Harish Salve, appearing for Franklin Templeton, submitted,"SEBI misleads the Court by saying similar matters are pending.".The Bench eventually ordered,"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. The submission is taken on record. We are not inclined to interfere with the order regarding the payment of Rs 512 crore. Appeals are accordingly disposed off. Four weeks' further time is given to SEBI before SAT, Mumbai. We direct SAT to dispose off matter expeditiously as possible.".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 of the risks involved..The schemes — 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 — together had an estimated Rs 25,000 crore as assets under management.Subsequent to the decision to wind up the schemes, SEBI ordered a forensic audit and appointed Chartered Accountants Chokshi and Chokshi LLP to conduct a forensic audit of the company and its trustees, particularly with respect to the six debt schemes..[Franklin Templeton debt schemes] Consent of unitholders should be sought for winding up, post publication of notice: Supreme Court.[Read a live account of the hearing]