According to information the San Mateo, California-based investment manager revealed in its newly filed annual report and in a statement on its Web site, t he individuals include one trader and one officer of its funds, Dow Jones reported. Both employees have been placed on administrative leave and the officer has resigned from his position with the funds.
The company also said it hasn’t found any instances of inappropriate trading by any portfolio manager, investment analyst or officer and hasn’t identified any late-trading problems. Its investigation isn’t complete, however, the company admitted. Franklin Resources oversees the Franklin and Templeton fund families.
State and federal regulators have been pursuing a wide-ranging investigation over the last several months that has focused in large part on allegations of market timing and late trading abuses.
The company said it is also responding to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the company conducts its global asset management business. Franklin Templeton said it has been asked to furnish both documents and testimony in connection with a US Securities and Exchange Commission private investigation that resulted in a legal action against Morgan Stanley.
Franklin Resources said the information involves its arrangements to compensate brokers who sell fund shares. As of November 28, the company decided to cut off relationships with brokerages where the allocation is based on sale of fund shares in order to satisfy preferred list or other shelf-space arrangements.
Franklin Templeton also revealed in its annual report that its units have been named in three lawsuits alleging breach of fiduciary duty with respect to the valuation of the portfolio securities of certain of its funds. The suits filed in October and November name the Templeton Funds, Templeton Global Advisors Ltd., Templeton Global Smaller Companies Fund Inc. and Templeton Investment Counsel. One suit also names the Templeton World Fund.
The company said it believes the claims made in each of the lawsuits are without merit and said it intends to vigorously defend against them.
Also in the company’s annual filing was word that the investigation into Franklin Templeton is apparently expanding.
Two months after revealing it had been hit with subpoenas from the SEC and New York State Attorney General Eliot Spitzer, the company disclosed that it has received more information requests. The new requests were from t he US Attorney for the Northern District of California, the US Attorney for the District of Massachusetts and certain foreign regulatory bodies.
Franklin Templeton said the company and certain current and former executives and employees have gotten requests for information and subpoenas to testify or produce documents – requests with which Franklin Templeton said it is complying.
As of September 30, Franklin Resources had $301.9 billion in assets under management, up from $287 billion as of June 30.
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