Franklin Resources Inc. said in a filing that it may be in trouble from the state of California for revenue-sharing payments made to brokerage fims, Dow Jones reports. In addition, the company said California Attorney General Bill Lockyer told the company that enforcement action would be authorized.

The news comes seven months after Lockyer announced a deep look into revenue sharing between mutual funds, including Franklin, and brokers. Neither California nor Franklin would confirm to Reuters on whether a whether a settlement or a lawsuit is upcoming.

Franklin is already in apparent trouble from the Securities and Exchange Commission for revenue-sharing agreements, and the firm even stashed aside $21.5 million in the second quarter to pay for what it called "anticipated settlement of governmental investigations concerning payments to securities dealers who sell fund shares."

The arrangements stem from Franklin apparently paying extra money to brokers for recommending certain funds, a practice that Capital Research & Management's American Funds and bond-fund firm Pacific Investment Management Co. are also being probed on.

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