Bay State's Galvin Fines Franklin $5M

September 20, 2004 (PLANSPONSOR.com) - A Massachusetts securities regulator announced Monday that he slapped two units of Franklin Templeton with a $5 million fine for permitting an investor to market time their mutual funds.

William Galvin, the Bay State’s Secretary of the Commonwealth, said Franklin Advisers Inc. and Franklin Templeton Alternative Strategies Inc. agreed to the fine and admitted to allowing the improper trades, Reuters reported. The California-based mutual fund firm agreed last month to pay $50 million to settle market timing charges with the US Securities and Exchange Commission (SEC).

Galvin said Franklin allowed a “known market timer” to invest in mutual funds in exchange for an investment in a company hedge fund, in an arrangement also called “sticky assets.”

“This case was a blatant example of one rule for the ordinary investor but a different practice for a high roller,” Galvin said in a statement. “The admission is a clear signal to investors and the industry that this double standard is illegal and will not be tolerated.”

State and federal regulators have been pursuing a wide-ranging investigation of the mutual fund industry focusing primarily on market timing, late trading, and certain sales practices.

More information about Galvin’s case against Franklin Templeton is at  http://www.sec.state.ma.us/sct/sctft/ftidx.htm .

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