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The Chennai Financial Markets and Accountability (CFMA), an investor group, on Thursday accused the Association of Mutual Funds in India (AMFI), a nodal association of mutual funds across India, of protecting Franklin Templeton Mutual Fund (FTMF) and its senior management against an FIR registered with the Economic Offences Wing of Chennai Police.

The CFMA alleged that the AMFI, the body claims to protect and promote the interests of mutual funds and their unitholders, has been a mute spectator ever since the FTMF scam ballooned to a whopping Rs 28,000 crore broke in April this year, and has now suddenly rushed to defend the indefensible fund house by calling an FIR registered against it as "dangerous and undesirable precedent."

The AMFI has urged market regulator SEBI to intervene in the matter since it has "vast jurisdiction containing administrative, civil and penal domains" and prevent the case from "getting translated into a criminal investigation." Notably, it further requested the SEBI to exercise its statutory powers to shield one of its members - FTMF - and to insulate the MF industry from any undesirable and unwarranted precedent.

By covering up the misdeeds of FTMF's and not saying even a word in favour of the unitholders, the CFMA said, the AMFI has failed to address the grievances of investors aggrieved by the freezing of six of the debt funds of FTMF.

According to the CFMA, the AMFI is undermining a lawfully registered FIR against FTMF when it is not even privy to either the Forensic audit report or the internal management of FTMF unless its President Sanjay Sapre, who is on the Board of Association of National Exchanges of Members of India, has briefed the AMFI with sketchy details.

It noted that the AMFI, which is acting against the interests of FTFM unitholders, wants SEBI being the market regulator to govern and execute all actions, including criminal cases, whereas it is well known that such powers rest with the police to take cognizance of, and protect the rights of citizens who complain of financial loss by way of fraud and criminal breach of trust.

The CFMA alleged that the AMFI is deliberately feigning ignorance about the fact that banks, which are regulated by the RBI, get prosecuted by law enforcement agencies like the EOW or CBI in case of criminal cases involving the loss to depositors, as in the case of Yes Bank, DFHI, PMC Bank in recent times and also in UTI Mutual Fund some years back.

The investor group pointed out that the AMFI is turning a blind eye to the fact that the FIR was registered in full fairness and transparency. The matter was discussed in the Karnataka High Court and the EOW, Chennai, was given enough time to investigate the matter following which it found merit in registering the FIR. By objecting to the FIR, FTMF is casting aspersions on the views of the Karnataka High Court and the authority of the EOW as well.

Interestingly, it highlighted, the AMFI has given clean chit to FTFM without even waiting for forensic report, police investigation and the Karnataka High Court, the way the then Board of ICICI Bank gave clean chit to its erstwhile MD and CEO Chanda Kochhar.

The CFMA expressed its concern over the AMFI's complete lack of empathy towards three lakh investors whose over Rs 28,000 crore is stuck amidst fears of a head-cut of 80 per cent which means a loss of Rs 20,000 crore. In doing so, the AMFI is going against its very core objective of being a self-regulatory organisation, it said adding that the performance of bodies like the AMFI itself needs closer examination to stop the recurrence of risks like FTMF.

With so much power to protect the interests of the investors, it pointed out, the SEBI and the AMFI are unfortunately seen protecting mutual funds, their employees, their Board of asset management companies and trustees instead of the unitholders. The CFMA suggested that the AMFI should not obstruct the process of law in a sub-judice matter and also not use the SEBI to influence the judiciary.

Meanwhile, the CFMA is contemplating filing a class-action suit against the global fund house for recovery of money and to claim damages, and has also urged all aggrieved investors to come together for filing the class-action suit.