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3 Minutes to Read by 3 Minutes to Read by 3 Minutes to Read by 3 MUMBAI, India (Reuters) – After a senior executive of U.S. money manager Franklin Templeton (FT) contested the judgment, an Indian tribunal put it on hold on Thursday, saying the market regulator had “overstepped” its authority in making the decision. PHOTO FROM THE FILE: On March 1, 2017, the Securities and Exchange Board of India (SEBI) emblem is seen on the façade of its headquarters building in Mumbai, India. REUTERS/File Photo/Shailesh Andrade The Securities and Exchange Board of India (SEBI) barred Vivek Kudva, the head of Asia Pacific distribution at FT, last month, alleging that he and his family members used non-public information to sell holdings worth about $4 million in Franklin debt funds that were shut down weeks later, causing investor panic. Kudva and his wife were given a one-year market ban and fined a total of $1 million by the commission. It was not “fair conduct,” it said, because Kudva had access to non-public information. Kudva said that he acted solely on public information in an appeal heard by the Securities Appellate Tribunal on Thursday. The SEBI protested to his viewpoint, but the tribunal judges agreed to postpone the ban until his appeal was heard. However, the panel stated that Kudva will be required to deposit half of the penalty levied on him. Kudva said in his 232-page appeal file, which was seen by Reuters but is not public, that while Indian law forbids unfair commercial practices, mutual fund redemptions are not a “transaction” and are comparable to withdrawing one’s own money from a bank. SEBI had “overstepped its authority and misused discretion” in issuing its order, and there was no rationale in the regulator’s decision “to justify the draconian directions and restrictions,” according to the filing by Kudva, a former HSBC executive who has worked at the Financial Times for more than 15 years. Franklin Resources Inc.’s Franklin handles more than $8 billion in assets for over 2 million clients in India. Its India unit is embroiled in a broader legal battle with SEBI after the fund house, which is considered a fixed income heavyweight, was barred from launching any new debt schemes for two years following a probe into the closure of six credit funds in 2020, which found “serious lapses and violations,” according to the regulator. After hearing Franklin’s appeal, the securities tribunal put the SEBI decision on hold this week, but it nevertheless ordered it to deposit approximately half of the $68.5 million it was required to return. The appeals of Kudva and Franklin will be heard on August 30. The fund company stated in its appeal filing, obtained by Reuters, that it behaved in the best interests of investors and followed Indian legislation in winding up the funds, and that it had transferred approximately three-quarters of the assets to unitholders by mid-June. FT used “business discretion in good faith” to close the funds, according to the submission, and should not be penalized for it. Abhirup Roy and Aditya Kalra contributed reporting, and Muralikumar Anantharaman edited the piece./nRead More

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