BOSTON (AP) – State regulators accused the parent company of mutual fund firm Franklin Templeton of fraud Wednesday for allegedly allowing a Las Vegas businessman to market time $45 million in mutualfunds in exchange for a $10 million investment in Franklin funds.
Secretary of State William Galvin said his office had filed a civil complaint against San Mateo, Calif.-based Franklin Resources Inc., alleging the company violated the trust of investors, who had been assured the company would not tolerate market timing.
Galvin’s complaint alleges that in 2001 former Franklin executive William Post, who was not named as a respondent, made an agreement with Daniel G. Calugar of Las Vegas, president of Security Brokerage Inc., under which Calugar would be able to market time in Franklin funds in exchange for parking $10 million in Franklin hedge funds.
A Franklin spokeswoman did not immediately return a phone message seeking comment.
“This case is another example of a mutual fund having one standard for the ordinary investor and an entirely different one for some able to move millions and millions of dollars through it in market timing trades,” Galvin said.
Market timing refers to trades that move quickly in and out of mutual funds. The practice is not illegal but some regulators have contended companies that tolerate it despite promises not to have committed fraud.
The suit seeks that an unspecified fine and that any illegal profits be returned to shareholders.
