Franklin Resources this week publicly admitted to charges that it extended trading privileges in proprietary mutual funds to a Nevada-based market timer who promised direct investment in at least one of its hedge funds, CBS MarketWatch reports.
The firm's mutual fund and hedge fund subsidiaries, respectively known as Franklin Advisers and Franklin Templeton Alternative, took the rare step of acknowledging regulatory violations as part of a $5 million settlement. Mutual fund providers typically neither admit nor deny wrongdoing before agreeing to settlements imposed by regulators.
Both subsidiaries confirmed that in 2001 Daniel Calugar, a Nevada-based market timer, forged a deal with William Post, them vice president of Franklin Templeton Alternative Strategies. The agreement permitted Calugar to disregard the mutual fund provider's trading rules by rapidly trading as much as $45 million of Franklin Small-Mid Cap Growth Fund, according to Massachusetts Secretary of the Commonwealth William Galvin.