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Sebi seeks probe into Franklin Templeton India’s debt funds collapse

Author : Saipriya Iyer | Published Date : 2020-05-04 

The Security and Exchange Board of India (SEBI), the market regulator of India, shall be investigating if the local unit of Franklin Templeton had violated the rules or had acted in the investor’s best interest, as six debt funds of the asset manager collapsed. The US parent of Franklin Templeton India has also begun the inquiry.

Apparently, Sebi shall be starting a probe in the matter, see if the asset manager had misrepresented any risks that were associated with investments in the funds by having classified them incorrectly as ‘income funds’, therefore committing a violation of the model code of conduct and also if the investments of the fund met all the fiduciary needs.

According to sources familiar with the matter, the probe is to determine if there has been a failure of risk management. The queries put forth by Sebi are essentially on the portfolio of all six schemes, the extent of borrowing from the bank, the liquidity of the underlying bonds and the rationale for selecting all such papers.

Sebi typically tends to audit the investment rationale in such instances, along with the time of all the meetings of the investment committee from the past five years. The schemes had allegedly not followed the scheme classification mandate of Sebi. The credit risk funds are supposed to invest a minimum of 65% of their overall holdings in securities that have been rated below AA+.

The debt schemes that also includes income funds are supposed to be invested in bonds that have higher ratings. The parents of the asset manager have also been looking into all the reasons that had led to the drastic action.

The inquiries made by the parent mostly revolve around the major impact that the decision makes on the brand while the probe made by Sebi is directed towards in understanding the commitment of the fund house to sufficient risk management, credit research, portfolio diversification and if the funds have violated the fund categorization norms of Sebi.

 

 Source Credit- https://www.livemint.com/news/india/franklin-templeton-s-decision-to-wind-up-6-debt-schemes-attracts-multiple-probes-11588503867942.html

About Author

Saipriya Iyer

Saipriya Iyer

Saipriya Iyer presently works as a content developer for fractovia.org. Having dabbled with the domain of content creation for nearly half a decade, she now boasts of an enviable portfolio, holding substantial experience in penning down pieces related to technology, finance, and a wide spectrum of other industry verticals. A qualified computer engineering graduate from the University of Pune, Saipriya can often be found leveraging her knowledge of software technology and electronics in her write-ups. She can be contacted at- [email protected] | https://twitter.com/saipriya_i

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