Franklin to Pay $5 MillionSep 21, 2004 | AP Two Franklin Templeton Investments units will pay $5 million to settle a Massachusetts complaint that the firm allowed a big hedge fund investor to make inappropriate mutual fund trades.
The announcement comes a month after the firm reached a $50 million settlement with federal regulators concerning similar allegations. The agreement on Monday was the latest in the industrywide fund trading scandal.
Under terms of the consent order entered Monday, Franklin Advisers Inc. and Franklin Templeton Alternative Strategies Inc. admitted to allowing what is known as market timing, even though the fund's prospectus language prohibited such practices, the secretary of the commonwealth, William F. Galvin, said.
Market timing is a type of rapid, in-and-out trading that is not illegal, but is widely restricted by many funds because it skims profits from long-term shareholders.