Brokers seek action against Templeton 

#GS3 #Economy  

A high-powered panel must take over management of fund house, says brokers’ association. 

  • Stock brokers want the government and the capital markets regulator to take strict action against Franklin Templeton Mutual Fund, including appointing a high-powered committee to take over the management of the fund house while examining investment decisions taken by the house.  
  • The Association of National Exchanges Members of India (ANMI), an umbrella body representing about 900 brokers, has again written to the Ministry of Finance and the Securities and Exchange Board of India (SEBI) seeking urgent action to safeguard further erosion of investor wealth while enabling a plan for investors to get their money in a time-bound manner.  
  • While highlighting the fact that a significant portion of the investments in the six schemes that Franklin Templeton MF decided to wind up were in securities that were rated ‘A’ or lower, the broker body has said that questionable investment decisions forced the fund house to stop redemptions.  
  • Based on portfolio details published by FTMF of the six funds, it appears that the profile of some of the companies FTMF chose to invest in and the terms of those investments are questionable.   
  • When market slowdown gripped the economy, there was a substantial price erosion in low-rated papers in the debt market where FTMF had invested heavily, forcing them to stop the redemption.  
  • As much as 64.73% of the total assets under management (AUM) of Franklin India Low Duration Fund was in securities rated A or lower.   
  • In Franklin India Short Term Income Plan, such securities accounted for nearly 59% of total assets. As per the broker body, Franklin Templeton MF invested in long-duration securities even though SEBI norms clearly state that ultra-short duration funds can have bonds with a tenure between three months and six months.  
  • Meanwhile, in yet another instance of a credit fund taking a hit due to an illiquid debt market, the net asset value of BOI AXA Credit Risk Fund took a 50% hit after marking down seven securities in its portfolio.  
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