Franklin Advisers has settled with the SEC for $50 million, $30 million of which is for disgorgement and $20 for a civil penalty. The entire sum will be paid out to shareholders in funds affected by the firms market timing, the SEC said.
The firm also agreed to overhaul its compliance oversight and reporting procedures and to hire an independent third party to conduct compliance reviews twice a year.
The SEC found that Franklin permitted dozens of select customers to conduct market timing between at least 1996 and 2001, contrary to language in fund prospectuses. Between 1998 and 2000, one of these market timers was a broker/dealer.
"We are pleased to announce this settlement in which Franklin has agreed to undertake significant reforms and pay a total of $50 million," said Linda Chatman Thomsen, deputy director of the SECs division of enforcement, in a statement. Helane Morrison, district administrator of the SECs San Francisco district office, added: "Franklin allowed known market timers to trade in and out of its funds in a manner contrary to the guidelines of the fund prospectuses."
Franklin issued a statement Monday saying the settlement had been accrued in the first quarter and will not result in any additional charge to income. The firm also said it is still cooperating with regulators concerning its revenue-sharing agreements.
