After falling prey to the infamous Karvy Stock Broking scandal in 2019, Ashok Ghose, a senior citizen from Pune, was feeling lucky in April this year when he received his shares back after months of efforts. “I had managed to get my corpus back by tweeting and making a noise and getting in touch with Mr Parthasarathy of Karvy Group. Somehow, he took pity on me and I got my shares back on April 20,” Ashok Ghose told Financial Express Online. Little did he know that a few days later, he would find himself in the middle of another unprecedented financial event — Franklin Templeton shutting its six debt mutual fund schemes.
Hopes of relaxed retired life dashed
Ghose is among the lakhs of unitholders of the six debt mutual fund schemes that were abruptly shut by Franklin Templeton India in April this year. “I’m a retired guy who put in a lot of my money in Franklin Templeton post-retirement, thinking it is a big name,” he said. Ghose invested a large part of his holding in the Franklin India Ultra Short Bond Fund, some of it in the Franklin India Low Duration Fund and also in Franklin India Short Term Income Plan.
Debt funds, often sold to retired people by distributors, with an expectation of attractive returns and fixed income, also carry with them significant risk — a fact often ignored by those selling and buying these funds. Ashok Ghose is not the only senior retired person who invested his money in Franklin Templeton expecting fixed income as a retired pensioner. 73-year-old retired Army Major General Rajbir Singh Gill, who fought all wars for India since 1971, is also among the unfortunate unitholders. “I want to know if any other country in the world does this with its veterans,” he said while questioning the silence of SEBI, Finance Ministry, and even the Prime Minister on the Franklin Templeton fiasco.
‘Was about to redeem’
Having gone through the Karvy Stockbroking episode earlier, Ashok Ghose claims he was about to pull money away from Franklin Templeton in March. “Back then Franklin Templeton had put Vodafone in a segregated portfolio. I was confident back then that Vodafone would not take away investor money,” he added explaining why he did not pull away from the schemes earlier.
On the other hand, Rajbir Gill was not so confident about the whole situation even after the Vodafone securities were placed in a segregated portfolio. He said that he had tried to take money out of the schemes but was misled by the local distributor who advised him to hold his position till March 31. However, before he could proceed with the redemption, the coronavirus lockdown was announced, bringing his plans to a halt.
Also Read: Franklin’s shut schemes get Rs 11,907 cr since winding up
Gill invested not only his money in Franklin Templeton but his 96-year-old mother’s as well. He questions the move made not just by capital markets regulator SEBI but also the Supreme Court, which asked SEBI to provide the forensic audit report of the wound-up funds under a sealed envelope. “Who is the court protecting? Is it the investors or Franklin Templeton and SEBI,” he asked? “Fact remains that SEBI has lost no money, Franklin Templeton has lost no money, it is we who have lost money and nobody is protecting,” Gill added.
Franklin Templeton and Unitholders meet today
After Franklin Templeton was dragged to legal corridors, the Supreme Court ordered the fund house to seek the consent of unitholders for winding up the six schemes that it has already shut down. However, unitholders were asked to vote in favour of winding up or re-opening the schemes without seeing the forensic audit report. Investors such as Ashok Ghose and Rajbir Gill see nothing good coming out of the voting which ended yesterday.
“I don’t feel voting will make a difference,” Ghose said prior to voting. Gill on the other hand says that even though unitholders are not the guilty party here, they have been told that if they don’t vote in favour of closing the schemes they might lose money. “Suppose I vote in favour of closing the funds, after months they come up to me and say that you invested Rs 1.5 crore of your life savings with us but we could only give you around Rs 70 lakh and rest is all lost,” The war veteran said.
After today’s meeting between unitholders and Franklin Templeton will submit the result of the vote to the Supreme Court which will resume the hearing of the matter in January.
CFMA bats for voting for reopening funds
The Chennai Financial Markets & Accountability (CFMA) a society working in investors’ interest lobbied to vote for re-opening of funds. Some small unitholders although lauding CFMA’s efforts said that it fails to see what damage reopening would do. CFMA, however, says that voting No for winding up would result in reopening of the schemes but would not lift the ban on redemptions placed by the Supreme Court and reopening would lead to the apex court hearing the matter in totality.
Also Read: Franklin Templeton: CFMA moves Supreme Court, says no apparent steps taken by SEBI to appoint observer
“The issue of the risk to the investment made by unitholders and the mismanagement of funds by the Franklin Templeton AMC and Trustees would not get delinked from each other if the matter – including the issue of redemption – is heard in totality before the decision is taken. Thus, the fear psychosis being created by the Franklin Templeton is intended to mislead unitholders,” CFMA said. It is important to note that CFMA or any of its office bearers do not have any exposure to Franklin Templeton Mutual Funds.
While calling the reason cited by Franklin Templeton to wind its funds up as a lie, CFMA said that the fund house took advantage of the coronavirus aided situation while no other mutual fund or any other Franklin Templeton schemes were closed down.
Easing in investors to wind up the funds
Franklin Templeton had already tried to warn investors against reopening of the funds. In a letter addressed to the investors, Franklin Templeton said that if unitholders vote against the order winding up, “the schemes may suffer significant losses due to the need to sell securities at distress prices to fund heightened redemption volumes,” it said earlier this month.
Voting ‘Yes’ or ‘No’ does not mean much for unitholders as they see no light at the end of this gory tunnel. Investors such as Ghose, Gill and several others who did not wish to be named but shared their troubles with Financial Express Online, feel betrayed by a trusted financial institution, market watchdog, the courts, and even the policymakers for their silence while lakhs of investors were deprived of their hard-earned money.