Franklin Advisers, Franklin Templeton agree to SEC penalties of $325,000

The Securities and Exchange Commission has settled charges against Franklin Advisers for breaching its fiduciary duty to its client funds and failing to follow its own policies and procedures. It also settled charges against Franklin Advisers and Toronto-based Franklin Templeton for causing client funds to violate investment limitations.

Without admitting or denying the SEC’s findings, Franklin Advisers consented to a cease-and-desist order, a censure and a civil penalty of $250,000, and Franklin Templeton Investments consented to a cease-and-desist order and a civil penalty of $75,000.

According to the SEC’s order, from October 2013 to November 2015, both Franklin Advisers and Franklin Templeton Investments purchased certain exchange-traded funds on behalf of client funds, causing the funds to exceed limits that prohibit the investment of more than 10% of an investment company’s assets in other investment companies or acquiring in excess of 3% of the outstanding shares of an investment company.

The SEC’s order also found that Franklin Advisers sold shares of certain ETFs held by its client funds in order for the funds to come into compliance with the limitations, causing certain client funds to suffer more than $2 million in losses.

Franklin Advisers did not reimburse its client funds for these losses, despite its trade error policy normally providing otherwise, the SEC said in a release. Franklin Advisers then failed to disclose to the client funds’ board of directors the losses incurred, Franklin Advisers’ decision not to reimburse the losses, the associated conflicts of interest, or the deviation from Franklin Advisers’ trade error policy.

[More: Franklin Templeton buys AdvisorEngine]

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As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.

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