Skip to Content
Fund Spy

Scandal Sullies Franklin Templeton's Reputation

Firm's offenses aren't among the worst, but are still disappointing.


Like a teacher who catches a good student passing exam answers to a classmate, we're very disappointed with Franklin Templeton Investments.

The firm has been implicated in the ever-widening mutual fund trading scandal. Its transgressions do not seem to rise to the level of malfeasance we have seen at other firms and do not warrant action on the part of current or prospective shareholders. Still, the allegations sully the record of what has been a reputable and responsible fund family.

The Situation
The allegations are surprising. Massachusetts securities regulators say Franklin let Las Vegas hedge fund manger Daniel Calugar market-time the  Franklin Small-Mid Cap Growth Fund (FRSGX) in return for a $10 million investment in a Franklin-sponsored fund of hedge funds. Franklin never disclosed the arrangement, which violated prospectus language barring frequent trading in the fund, according to the complaint.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.