Mumbai: A senior official at US Money Manager franklin templeton (FT) told an Indian appellate tribunal that the country’s market watchdog “overstepped” its powers by banning him from the securities market for unfair trade practices, a filing showed.
Vivek Kudva, head of Asia Pacific distribution at the FT, was banned by the Securities and Exchange Board of India last month. (SEBI), which said he and his family members used non-public information to sell about $4 million worth of holdings in Franklin debt funds, which were closed weeks later and caused panic among investors.
In an appeal filed in the Securities Appellate Tribunal, Kudva argued that Indian law prohibits unfair trade practices, but mutual fund redemption was not a “trade” and was tantamount to withdrawing one’s money from a bank.
When contacted on Thursday, Kudva said in a statement that he has always acted in accordance with Indian rules and that his “personal transactions” were “done in good faith and not with the intent to gain undue advantage”.
SEBI did not immediately respond to a request for comment.
The regulator imposed a one-year market ban on Kudva and his wife and fined them $1 million. It said it was not “fair conduct” because Kudva was privy to non-public information.
Arguing that he acted only on public information, Kudva said there was no rationale in Sebi’s decision “to justify stricter directions and restrictions”, according to his 232-page filing that was seen by Reuters. and is not public.
SEBI “abused its authority and abused discretion,” said Kudva, who has worked in the FT for more than 15 years and is a former HSBC executive.
His appeal will be heard by the tribunal later on Thursday.
The filing comes as FT India is locked in an extensive legal battle with Sebi, a fund house considered a fixed-income heavyweight, after an investigation into winding up six credit funds in 2020 for any two years. The introduction of the new loan scheme was stopped. The regulator said “serious omissions and violations” were found.
The Securities Tribunals this week after hearing Franklin’s appeal stayed the Sebi order, but still ordered the fund house to deposit almost half of the $68.5 million it was asked to refund.
In the FT’s appeal filing, seen by Reuters, the fund house argued that it acted in the interest of investors and followed Indian rules in closing the fund, and by mid-June distributed nearly three-quarters of assets to unitholders .
The filing said the FT used “business judgment in good faith” to wind up the fund and should not be penalized for it.
Franklin, part of Franklin Resources Inc., manages more than $8 billion for more than two million people in India, and has said it is committed to the market.
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