Franklin Templeton moves to calm Indian investors after new debt fund ban

SEBI barred Franklin from launching any new debt schemes for two years after a probe into its sudden closure of six credit funds last year found serious lapses and violations

By Abhirup Roy and Aditya Kalra

NEW DELHI (Reuters) -Franklin Templeton India told investors on Wednesday that the market regulator's ban on its launching new debt funds would have no impact on existing funds that manage $8 billion in assets.

The Securities and Exchange Board of India (SEBI) on Monday barred Franklin from launching any new debt schemes for two years after a probe into its sudden closure of six credit funds last year found "serious lapses and violations."

Franklin has said it strongly disagreed with SEBI's order and planned to appeal it. In an e-mail to investors on Wednesday seen by Reuters, the fund house sought to reassure investors about any broader impact its other funds.

"I would like to clarify upfront, that the SEBI order has no impact on other schemes managed by Franklin," India President Sanjay Sapre said in the email.

Franklin continues to manage more than 610 billion rupees ($8.36 billion) for more than 2 million investors in India, he added.

Franklin has faced regulatory probes and court battles since April 2020 when it unexpectedly wound up six credit funds in India with assets of close to $4 billion, citing a lack of liquidity amid the coronavirus pandemic. Those funds had large exposure to higher-yielding, lower-rated credit securities.

In the Monday order, SEBI also ordered the fund house to refund investment and advisory fees, along with interest, of more than 5 billion rupees ($68.51 million), and fined the global giant another 50 million rupees.

One senior Indian fund manager, who declined to be named, told Reuters that money managers grew more cautious about investment decisions after the SEBI order.

"SEBI now is not leaving any room for any deviation and it's becoming very strict ... there is a heightened level of alertness and attention that has come," the manager said.

(Reporting by Abhirup Roy and Aditya Kalra; Additional reporting by Sudarshan Varadhan and Sankalp Phartiyal; Editing by Cynthia Osterman)