SEC Drops Pursuit of Franklin's CEO

March 3, 2004 ( - Greg Johnson, the president and co-Chief Executive Officer (CEO) at Franklin Resources Inc can breathe a sigh of relief; the US Securities and Exchange Commission (SEC) says it no longer intends to recommend civil action against him.

The SEC was examining possible legal action against Johnson after it was revealed he may have been intimately involved in an improper market timing arrangement in 2001.   However, in an SEC filing, the nation’s largest publicly traded mutual fund company disclosed the agency was no longer pursuing that course of action, according to a Reuters report.

Even though Johnson may be off the hook for the moment, the firm as a whole still faces charges filed earlier that month by Massachusetts Secretary of the Commonwealth William Galvin.   In those charges, Galvin accused the nation’s fourth largest mutual fund company of allowing a wealthy client to make short-term trades in Franklin-Templeton funds in return for a $10 million investment in aFranklinhedge fund.

The civil fraud suit alleges that former Franklin senior vice president William Post, who resigned from Franklin in December, struck a deal with Las Vegas investor Daniel Calugar that permitted frequent market-timing trades in Franklin stock funds (See Franklin: SEC Civil Charges Pending ).   Subsequent news reports about the situation indicate that Franklin’s scandal woes may be more widespread than just related to one investor (See Report: Franklin’s Trading Problems Worse than First Thought ).   For its part, Franklin said it was confident no investors were harmed by the unauthorized trading arrangement.