SEBI advises Franklin Templeton mutual fund to focus on returning money to investors

Last updated: 09 May 2020

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The Securities and Exchange Board of India (SEBI) has advised Franklin Templeton mutual fund to prioritise returning money to investors following the winding up of six of its debt schemes. This comes after reports suggested that SEBI's tightened norms for unlisted debt investments contributed to the pressure on these schemes. SEBI clarified that regulatory changes were implemented to enhance transparency and safeguard investor interests in the corporate bond market, particularly concerning opaque unlisted debt securities. These changes included mandating investments in listed debt instruments and setting limits for unlisted ones, with phased implementation and grandfathering of existing investments.

Securities and Exchange Board of India Press Releases No. 26/2020 May 7, 2020 SEBI has advised Franklin Templeton mutual fund (FT) to focus on returning money to investors, in the context of their winding up six of their debt schemes. SEBI has also noted that a section of the media has reported quoting FT that tightening of norms for investment in unlisted debt by SEBI was one of the factors that added to pressure on their debt schemes which resulted in winding up of their schemes.

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FAQ :

SEBI has advised Franklin Templeton mutual fund to focus on returning money to investors.

While not explicitly stated as the sole reason, SEBI noted media reports quoting Franklin Templeton that tightening of norms for investment in unlisted debt by SEBI was a contributing factor to the pressure on their debt schemes.

SEBI has mandated that mutual fund schemes invest primarily in listed non-convertible debentures (NCDs) and listed Commercial Papers (CPs). Investments in unlisted NCDs are permitted up to a maximum of 10% of the debt portfolio, provided they are simple, rated, secured, and have monthly coupon payments.

These regulations were to be implemented in a phased manner by June 2020. SEBI also allowed existing investments in unlisted debt instruments to continue until maturity.

The changes were made to address issues of opaqueness and lack of disclosure in unlisted debt securities, thereby improving transparency and safeguarding investor interests in the corporate bond market.

Notification No : Press Releases No. 26/2020
Source : https://www.sebi.gov.in/media/press-releases/may-2020/sebi-advises-franklin-templeton-mutual-fund-to-focus-on-returning-money-to-investors_46654.html

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