SC nod to SBI MF plan for Franklin schemes
The securities and money would be transferred to specially designated accounts for disposal, and Franklin would have to provide SBI MF with all the relevant documentation
The Supreme Court on Thursday accepted a standard operating procedure (SOP) statement put forward by SBI Mutual Fund (MF) for the disposal of assets in six debt schemes of Franklin Templeton Asset Management frozen on 23 April 2020.
About ₹9,122 crore has so far been returned to investors, out of the around ₹26,000 crore worth of assets frozen at the time.
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SBI MF informed the court that it would operate on a ‘best effort’ basis which means it will not be guaranteeing successful disposal of all assets. The disposal of assets would be done by a team headed by an official not below the rank of vice-president in SBI MF. Franklin Templeton would also have to depute two mid-level officials to assist SBI MF against whom no disciplinary or regulatory action has ever been taken.
The securities and money would be transferred to specially designated accounts for disposal, and Franklin would have to provide SBI MF with all the relevant documentation. It would also have to bear the expenses of winding up the schemes, according to the SOP statement.
SBI MF itself would not bid for any of the assets, to avoid conflict of interest. A one-to-many platform would be set up to sell the more liquid assets among them. For the rest, an over the counter system would be adopted with assets being sold through intermediaries or direct negotiation.
If SBI MF is not able to eventually liquidate some of the assets, they shall be transferred back to Franklin Templeton for necessary action. In case of any default in the paper held by the schemes, Franklin Templeton would have to initiate proceedings against the defaulting issuer, SBI MF told the court.
The surplus amounts collected will be deployed in instruments like tri-party repos or schemes such as SBI Overnight Fund or SBI Liquid Fund. Whenever substantial amounts are collected, SBI MF will distribute them to unitholders. The existing registrar and transfer agent (RTA) would continue to be used by SBI MF, and Franklin Templeton will have to facilitate the liquidation of units on the distribution of proceeds and the sending of statements of accounts to unit holders.
“The schemes have already distributed ₹9,122 crores to investors and have accrued another ₹1,370 crores in cash as on 15 March, 2021. Unitholders may note that the NAVs of all six schemes is now above the NAV as on the date of the winding up," said a spokesperson for Franklin Templeton.
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