Templeton Issue

Dear Colleagues,

I have received a letter from Franklin Templeton seeking to make amendments to the agreement with them for distribution services. While most of the clauses seem routine and as per SEBI diktat, clause 2 reads as follows.

" Notwithstanding anything contrary contained elsewhere in the agreement/declaration/undertaking (if any), the distributor hereby agrees that investors shall have unfettered and unrestricted access to transact and /or communicate in relation to any matter with Franklin Templeton Mutual fund / FTAMIL. The distributor agrees to inform customers about the same and provide such information as may be required by FTAMIL in connection thereof."

The letter also requests distributors to sign the letter as a token of acceptance and return within 30 days but goes on to say ......."Notwithstanding the foregoing requirement, the contents of this letter shall be binding between us from the expiry of 30 days from the date of this letter.

The letter dated 24th June, 2010 was delivered to me on 13th July, 2010.

I would appreciate your views on this matter and would like to know if you too have received such a letter.

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Best regards,

Allan Govias
Horizon Financial Services
New No.27, 2nd Floor
5th Street, Padmanabhanagar
Adyar,
Chennai 600 020
Tel: +91 44 2491 4862
+91 44 2446 1808
Mobile 0 98410 94840

Reply by Mr. Srinivasan of Money Kare

Dear All,

THIS IS A VERY IMPORTANT ISSUE PLEASE DO GO THROUGH AND RESPOND:

In continuation to below mentioned email of Mr. Allan we have contacted the local branch of Templeton on this issue, they say it is a clause specifically intended for MNC banks like Citi and HSBC which have online client accounts. The said accounts are operated by the client through the banks online platforms. The client can buy and sell the units of various mutual funds at one instant. There will not be any interaction between the client and concerned mutual funds the Bank will be the only face of contact for the client. Sebi has now it seems (have to be verified) made it mandatory for all the mutual funds to allow all the mutual fund investors to approach the concerned mutual fund directly if he wants to buy or sell its units. Till now the concerned MNC bank was the only face for the client thus making it difficult for the client to buy or sell even if he has closed the bank account.

Now coming to this clause: With regard to distributors like us IFA's, ND's etc. the client at any point of time can directly approach the concerned mutual fund and do any kind of transaction. In such a scenario WHY SHOULD WE ALSO SIGN THIS CLAUSE. I think we have to ask this question to the concerned officials.

That apart the Distribution Agreement signed by an IFA and that of a Bank are totally different. So Templeton can't ask us to sign a generic amendment agreement.

We request all the IFA's to send a mail to the concerned Relationship Manger or officials related to the registration and get the clarification. Till such time we request all to withhold the document. As it is we are giving the entire data to the mutual funds why should we further sign a amendment document and further complicate the relationship. Even if you have signed it please call back the document and keep it with you till we get a clarification.

Secondly, the deadline of 30 days offered by Templeton is ridiculous we don't know what will be the legal implication of the same. The letter dated 24th June 2010 and the same was received by us only on 13/07/2010. The letter states:

" We request you to affix your signature and/or seal in the place provided below and return one copy of this letter within 30 days from the date of this letter. Notwithstanding the foregoing requirement, the contents of this letter shall be binding between us from the expiry of 30 days from the date of this letter".

We think they cant impose on us such things.

Those who are aware of the legal complication of both these clauses kindly respond immediately.

Regards

Srinivasan S

MONEY KARE
Mobile No. 9841016902