Wait gets longer for Franklin Templeton investors; Supreme Court halts redemptions till January

The wait for investors of Franklin Templeton’s six debt mutual fund schemes continues to get longer. On Wednesday, the Supreme Court extended its previous order, staying all redemptions for the six schemes that were abruptly shut in April this year, till the third week of January. The apex court asked Franklin Templeton India to go ahead with its e-voting, beginning December 26, while asking the fund house to produce the results in a sealed cover to the court. It also asked capital markets regulator Securities and Exchange Board of India (SEBI) to appoint an observer for the e-voting process.

SEBI to appoint observer

Advocates for the unitholders argued that the forensic audit report of SEBI should be made available to them as it deals with their money while also taking aim at the capital market regulator for not having a policy for small investors. SEBI was pulled up by the apex court in its previous hearing, asking it why it did not intervene in the matter earlier like RBI did in case of banks. SEBI, while agreeing to appoint an observer, said that it has its own limitations. 

Franklin Templeton, on the other hand, said that the lawyers for unitholders were trying to create a panic. The fund house reiterated that it has been in favour of e-voting since the beginning. The bench comprising justices SA Nazeer and Sanjiv Khanna, while extending the previous order said that it should not be treated as a binding precedent in any other matter, as apprehended by SEBI.

Unitholders of the six shut down debt mutual fund schemes of Franklin Templeton will get to vote in favour of or against the wounding up the credit risk schemes during the voting process which will begin from December 26 and will continue till December 28. It will be followed by a meeting the very next day. Earlier this week, Franklin Templeton told investors that voting to re-open the scheme may result in significant losses due to the need to sell securities at distress prices to fund heightened redemption volumes.

Investor’s body against winding up

Separately, Chennai Financial Markets and Accountability, an investor group asked unitholders to vote against the winding up. In a bulletin published on December 8, CFMA urged the Supreme Court to let the forensic audit report be made available to unitholders before they are made to vote on the wounding up of the schemes. “It is our estimate that there is a large risk of erosion of principal amount to an extent of Rs 15,000 crore to Rs 20,000 crore, keeping aside the return on investments,” CFMA said.