Franklin Resources to Pay $40M in Canadian Settlement

March 3, 2005 ( - The Canadian unit of Franklin Resources Inc. will pay C$49.1 million ($39.4 million) to reimburse investors for allowing rapid trading of some of its mutual funds.

The agreement, contained in a settlement approved by Canada’s main market regulator, marks the end of a mutual fund probe begun by the Ontario Securities Commission (OSC) in late 2003, Reuters reported.

The unit, Franklin Templeton Investments Corp., is the fifth mutual fund manager to hammer out a market timing pact with the OSC, while the brokerage units of three of Canada’s biggest banks have also paid fines for similar conduct.

In its latest ruling, the OSC said Franklin Templeton permitted three institutional investors to market time its funds during a four-year period beginning in February 1999.The three investors made a profit of about C$120.8 million during that time, although not all of it was on market timing transactions. Franklin-Templeton charged management fees of $4.6 million on the trades, Reuters reported.

The regulator said it had found no evidence of the practice taking place since February 2003 or of market timing by insiders. It also found no instances of late trading.

In a  news release ,   the fund manager said it would retain an independent consultant to develop a plan for the payouts.

This is not the first market timing settlement for Franklin Resources. Last August, the company agreed to pay US$50 million as part of the federal-state fund industry probe in the US (See   Franklin Settles Market Timing Allegations ).