Sebi’s Franklin order heralds much needed reform for India’s notorious mutual fund industry

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Editor's note: 7 June 2021. A day that the mutual fund industry in India is unlikely to forget in a hurry. It is the day when the law finally caught up with Franklin Templeton India, which shuttered six of its debt mutual fund schemes in a sudden move a little over a year ago, leaving thousands of investors high and dry. On Monday evening, the Securities and Exchange Board of India came out with two orders running into over 100 pages, holding the fund house guilty of a gamut of serious lapses in the way it ran its fixed income schemes and a senior Franklin Templeton executive guilty of failing to perform his fiduciary duty and putting self-interest ahead of investors. The AMC has been held guilty of doing bare minimum in terms of adhering to the spirit of SEBI norms and having thoroughly one-sided deals with corporates at the expense of investors. While COVID-19 led illiquidity played a part in the shuttering of the six debt schemes on 23 April 2020 the bigger role was played by AMC’s strategy of investing …