In addition to the above, SEBI additionally fined the trustee firm a sum of Rs 3 crore and Saurabh Gangrade, Chief Compliance Officer, Franklin Templeton, a sum of Rs 50 lakh. Sebi in the order stated that the forensic audit report discovered that Franklin Templeton violated a number of rules in the administration of the six shut debt schemes.
“There were similarities in investment strategy though the investment objectives were differing in the six wound up schemes. This was observed by way of common fund managers, high exposures in “AA and below” corporate bonds in all the six schemes even though investment objectives as per the SIDs of these schemes are different. Further, as per the portfolio holding data, most of the securities are rated AA or below at the time of investment. In addition, there was concentration of similar securities across schemes under audit where investments were made over 70% of the issue of such debt securities and most of the investments which were made in schemes were common at time of investment,” stated Sebi in the order.
Sebi additionally stated that the practices associated to rate of interest reset papers and incorrect calculation of maculay period allegedly violated the Santosh Kamat, Kunal Agarwal, Sumit Gupta, Pallab Roy, Sachin Padwal Desai and Umesh Sharma. “In 42 instances (for FI-UBF) and 17 instances (for FI-LDF), exit options were in fact not exercised where available in FI-UBF and FI-LDF,” the order famous. Sebi additionally stated that FT MF failed to make sure that the modifications in phrases of investments are made accessible instantly for disclosure to valuation businesses and credit standing businesses and additionally for proper disclosure of portfolio to the buyers.
Sebi additional famous that Franklin Templeton failed to hold out due diligence with respect to investments in illiquid securities and it was additionally noticed that the sample of funding transactions is akin to giving mortgage to issuers. “No concrete steps were taken or guidance was provided in managing various risks viz., concentration, downgrades, early warning signal and liquidity issues, of the securities in the portfolio. Removal of investment risk monitoring from Business Risk Management Committee (BRMC) and lack of independence of risk management function was observed,” Sebi order stated.
The order additionally stated that FT failed to make sure that Investment Process Note (IPN) comprises detailed goal standards for funding and additionally failed to make sure acceptable coverage to have pro-rata allotment of partial buyback to all of the schemes.