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Franklin (BEN) Stock Plunges 12.6% Amid SEC Probe Disclosure
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Franklin Resources, Inc. (BEN - Free Report) shares plunged 12.6% and hit a 52-week low of $19.78 in the last trading session. The decline came as Western Asset Management, a unit of Franklin Resources, announced the replacement of its top investment executive amid federal investigations into his conduct.
The company replaced Ken Leech, who was serving as the co-chief investment officer (CIO) of its Western Asset Management unit. The move came as the CIO had taken a leave of absence after getting a Wells Notice from the Securities and Exchange Commission (SEC).
In a SEC filing, Western Asset Management stated that Leech had left the firm. Therefore, the company has decided to close its Macro Opportunities fund to "best serve clients," which managed around $2 billion in assets as of Jul 31. Also, the company mentioned, with immediate effect, Michael Buchanan, who also shared the role with Ken Leech has been named the CIO.
In a July 2024 regulatory filing, Franklin Resources announced the initiation of an internal investigation into "certain past trade allocations of treasury derivatives in select Western Asset Management" managed accounts.
It explained that Western Asset Management was cooperating with parallel government investigations by the SEC and the U.S. Department of Justice (DOJ). On Aug 21, BEN stated that it would "take action as warranted" based on the findings of the investigations by the SEC and DOJ.
Over the past six months, shares of BEN have plunged 27.1% against the industry’s 5.2% growth.
According to a Bloomberg report from Aug 21, federal prosecutors in the Southern District of New York are also investigating allegations of "cherry-picking," where winning trades were allegedly allocated to favored accounts.
The tumble in the share price and the sudden replacement of a top executive, along with the closing of a $2 billion macro-opportunities fund, came as a shocker for BEN. This reflects concerns that the recent probe could expand and prompt investors to pull out their assets from the company’s funds.
Other Finance Stocks Facing SEC Investigation
On Aug 2, Wells Fargo & Company (WFC - Free Report) announced that it was under government authorities' investigations on issues related to anti-money laundering (AML) and sanctions programs.
WFC disclosed this AML and Sanctions program inquiry in its second-quarter SEC filing. In the same filing, the bank mentioned that it is in “resolution discussions” with the U.S. SEC about an investigation related to the cash sweep options it provides to new investment advisory clients. The bank further added in its SEC filing that “There can be no assurance as to the outcome of these discussions.”
In May, Robinhood Markets, Inc. (HOOD - Free Report) received a notice from the SEC that its crypto business — Robinhood Crypto — could face an enforcement action. The notice comes as a result of the violation of registrations as a securities broker and transfer agent.
HOOD stated that a potential action from the SEC could be a civil complaint and a public court proceeding that may end up with a fine, a cease-and-desist order, and other restrictions on crypto operations.
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Franklin (BEN) Stock Plunges 12.6% Amid SEC Probe Disclosure
Franklin Resources, Inc. (BEN - Free Report) shares plunged 12.6% and hit a 52-week low of $19.78 in the last trading session. The decline came as Western Asset Management, a unit of Franklin Resources, announced the replacement of its top investment executive amid federal investigations into his conduct.
The company replaced Ken Leech, who was serving as the co-chief investment officer (CIO) of its Western Asset Management unit. The move came as the CIO had taken a leave of absence after getting a Wells Notice from the Securities and Exchange Commission (SEC).
In a SEC filing, Western Asset Management stated that Leech had left the firm. Therefore, the company has decided to close its Macro Opportunities fund to "best serve clients," which managed around $2 billion in assets as of Jul 31. Also, the company mentioned, with immediate effect, Michael Buchanan, who also shared the role with Ken Leech has been named the CIO.
In a July 2024 regulatory filing, Franklin Resources announced the initiation of an internal investigation into "certain past trade allocations of treasury derivatives in select Western Asset Management" managed accounts.
It explained that Western Asset Management was cooperating with parallel government investigations by the SEC and the U.S. Department of Justice (DOJ). On Aug 21, BEN stated that it would "take action as warranted" based on the findings of the investigations by the SEC and DOJ.
Over the past six months, shares of BEN have plunged 27.1% against the industry’s 5.2% growth.
Image Source: Zacks Investment Research
Currently, BEN carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
According to a Bloomberg report from Aug 21, federal prosecutors in the Southern District of New York are also investigating allegations of "cherry-picking," where winning trades were allegedly allocated to favored accounts.
The tumble in the share price and the sudden replacement of a top executive, along with the closing of a $2 billion macro-opportunities fund, came as a shocker for BEN. This reflects concerns that the recent probe could expand and prompt investors to pull out their assets from the company’s funds.
Other Finance Stocks Facing SEC Investigation
On Aug 2, Wells Fargo & Company (WFC - Free Report) announced that it was under government authorities' investigations on issues related to anti-money laundering (AML) and sanctions programs.
WFC disclosed this AML and Sanctions program inquiry in its second-quarter SEC filing. In the same filing, the bank mentioned that it is in “resolution discussions” with the U.S. SEC about an investigation related to the cash sweep options it provides to new investment advisory clients. The bank further added in its SEC filing that “There can be no assurance as to the outcome of these discussions.”
In May, Robinhood Markets, Inc. (HOOD - Free Report) received a notice from the SEC that its crypto business — Robinhood Crypto — could face an enforcement action. The notice comes as a result of the violation of registrations as a securities broker and transfer agent.
HOOD stated that a potential action from the SEC could be a civil complaint and a public court proceeding that may end up with a fine, a cease-and-desist order, and other restrictions on crypto operations.