FRANKLIN RESOURCES IS BEING INVESTIGATED BY SEC, DOJ and CFTC - Contact Kaplan Fox & Kilsheimer LLP

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On August 21, 2024, Franklin disclosed in a filing with the U.S. Securities and Exchange Commission (“SEC”) attaching a press release issued by Western Asset Management Co. (“Western Asset”), a subsidiary of Franklin, that the co-Chief Investment Officer of Western Asset, Ken Leech, “recently received a Wells Notice from the Staff of the U.S. Securities and Exchange Commission, and is on a leave of absence to focus on this matter.”  Western Asset “is also cooperating with parallel government investigations.”  According to an August 21, 2024 Bloomberg article both the U.S. Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) are investigating.

Following this news, the price of Franklin fell $2.84 per share, over 12%, to close at $19.78 per share on August 21, 2024, the largest single day drop since October 2020.

On September 5, 2024, Barron’s reported it had “learned from a person familiar with the matter that the SEC’s investigation focuses on three strategies Leech managed. Each strategy has a mutual fund version with different share classes -- Western Asset Core Plus Bond, Western Asset Core Bond, and Western Asset Macro Opportunities -- as well as multiple separate accounts overseen by Leech, totaling 38 accounts in all.”  Further, Barron’s reported that “[a]ccording to Morningstar, in the 12 months ended on July 31 before Leech’s departure, the now $17 billion Western Asset Core Plus Bond and the now $12 billion Western Asset Core Bond funds experienced $6.3 billion and $2.9 billion in shareholder outflows, respectively.”

Then on November 4, 2024, Franklin announced its preliminary fourth quarter and fiscal year 2024 results, reporting that “the Company impaired its indefinite-lived intangible assets related to certain mutual fund contracts managed by Western Asset Management by $389.2 million.”  During the earnings call held the same day, the Company’s Chief Financial Officer and Chief Operating Officer, Matthew Nicholls, said the impairment charge was “primarily due to the decreased [Assets Under Management] resulting from net client outflows and lower discounted future cash flows generated from these management contracts.”  Additionally, the Company’s Chief Executive Officer, Jennifer Johnson, revealed that the Commodity Future Trade Commission, or “CFTC”, is conducting an investigation in parallel with the previously disclosed DOJ and SEC investigations.

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If you have any questions about this investigation, please contact:

CONTACT:

Pamela A. Mayer
KAPLAN FOX & KILSHEIMER LLP
800 Third Avenue, 38th Floor
New York, New York 10022
(646) 315-9003
pmayer@kaplanfox.com

Laurence D. King
KAPLAN FOX & KILSHEIMER LLP
1999 Harrison Street, Suite 1560
Oakland, California 94612
(415) 772-4704
lking@kaplanfox.com