An error in the article comparing debt MF with Bank FDs came from CFMA press release via IANS. We have removed the error now.
The Chennai Financial Markets and Accountability (CFMA), an investor protection organisation, said on Wednesday that Franklin Templeton Mutual Fund (FTMF) has failed to honour its commitment made before the Supreme Court to distribute Rs9,122 crore to all the unit-holders of its six closed schemes, and paid 'zero to minuscule' amount to the investors of two shut schemes.
Out of the distributable amount, CFMA noted, FTMF has not paid a single paisa to the hapless unit-holders of Franklin India Income Opportunities Fund (FIIOF) and paid a meagre 8 per cent to the unit-holders of Franklin India Short Term Income Plan (FISTIP), forcing a write-off of 100% and 92%, respectively, on them.
The investor body alleged that the unit-holders of these two funds have borne the major burnt and are forced to take massive haircuts, contrary to repeated assurances from FTMF.
(Source: Franklin Templeton)
The CFMA pointed out that the impression was given to the Supreme Court by the FTMF that Rs9,122 crore out of Rs26,670 crore will be distributed among three lakh unit-holders of the six shut schemes, which constitutes 32% of the total amount, and the remaining amount would be paid later.
However, the fact that the unit-holders of FIIOF and FISTIP will not be receiving the funds was never disclosed before the apex court.
In the first tranche of pay-out, the unit-holders of FIIOF and FISTIP were being forced to take a haircut of 100% and 92%, respectively, instead of getting an average 32%.
"The data on the FTMF website clearly highlights that lies and truth cannot be hidden for long and strict action should be initiated against FTMF for not disclosing the correct facts," the investor body suggested.
The zero to negligible repayment to the unit-holders of the two schemes clearly indicated how badly the funds were managed. Considering the overall poor investment decisions and bad quality of assets of the six schemes, the CFMA reiterated that three lakh unit-holders will have to bear a minimum haircut of Rs15,000 crore on their principal amount and described it as a 'Black Swan' event for the entire mutual fund industry, which will set a precedent for others to follow.
(Source: Franklin Templeton)
Mutual funds are managed by professional fund managers and, therefore, they are expected to perform better than the benchmark. In case of an increase in bond yield, the returns to unit-holders should be more than the benchmark and in case of falling yields, the returns to unit-holders should fall less than the respective benchmark.
According to the CFMA, it is a wake-up call for market regulator SEBI to investigate the very basis of the distribution mechanism adopted by Franklin Templeton. FTMF secured consent for e-voting from all its unit-holders but has repaid a minuscule amount to the unit-holders of the four shut schemes, while repaying zero to negligible amount to the remaining two schemes.
In the past, the CFMA raised serious concerns about the functioning of SEBI as it failed in its fiduciary duty to protect the interest of its unit-holders after the FTMF shut its six debt schemes, leaving three lakh unit-holders in the lurch.
Despite being a sector regulator with huge powers, including penal provisions, the SEBI did not act to ensure the protection of unit-holders' investments, shrugging off its responsibility and allowing FTMF to use Covid-19 as an excuse for its fund mismanagement and to escape from its criminality, it added.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
So can there be not a word of acknowledgement (let alone appreciation) about the proper distribution of monies of matured instruments done by FTMF under the supervision by the top court ?
I recall other such publishings of MoneyLife cribbing about the petty things like voting button colors etc.
I shudder to imagine what would have happened had the investors voted against the shutting down as per the inclination of ML/CFMA and letting the schemes open for redemption ! Better sense has prevailed among investors (who are also ML followers) in not being carried away by such misleading voices by ML/CFMA.
Sad that MoneyLife has become mouthpiece of CFMA and has no interests to cover the positive aspects which is the investors have started receiving money as per communications by FTMF.
What happens eventually when distribution of all 6 schemes are completed eventually (which is highly likely) ? Will ML run a column eating back their opinions and words and seek apology for causing unwanted mental agony / stress to investors based on such articles they have put ? No. By then there will be new scapegoat on the block to run new sensitive stories and keep investors on the edge and catch their attention.
Ironically, ML will now say they are just messenger... so that investors have only themselves to blame and move on to look ahead for more new sensational stories!
Also perennial SEBI bashing is another feather on the cap for ML !
CFMA and publication like money life has brought to light the foresensic report on these funds. Once again Sir, my sincere empathy.
Yet you say the CFMA is wrong in labeling these losses. The labels are unimportant. What is important is the amount of loss.
Is this not a huge loss?
I would appreciate why you say that despite these losses CFMA is causing panic by enumerating the losses.