SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 6, 2004
(February 4, 2004)
FRANKLIN RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-9318 13-2670991
(Commission File Number) (IRS Employer Identification No.)
One Franklin Parkway, San Mateo, California 94403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 312-3000
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(Former name or former address, if changed since last report): Not Applicable
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On February 4, 2004, the Securities Division of the Office of the Secretary
of the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging a violation of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.
The Company believes that the mutual fund investment at issue did not
violate the fund's prospectus, and the Company is confident that no investors in
the mutual fund were harmed by the investment. A communication was sent on
behalf of this officer to the investor, that provided, among other things, that
the investor would receive different terms than normal with respect to the hedge
fund investment. This variance of the terms of the hedge fund investment was
unauthorized and was rejected by management of the Company. This is the same
officer who, as the Company disclosed in December 2003, had been placed on
administrative leave and has subsequently left the Company.
In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts and the Florida Department of
Financial Services, relating to certain practices in the mutual fund industry,
including late trading, market timing and sales compensation arrangements, the
Company and its subsidiaries, as well as certain current or former executives
and employees of the Company, have received requests for information and/or
subpoenas to testify or produce documents. The Company and its current employees
are providing documents and information in response to these requests and
subpoenas. In addition, the Company has responded to requests for similar kinds
of information from regulatory authorities in some of the foreign countries
where the Company conducts its global asset management business.
The Staff of the SEC has informed the Company that it intends to recommend
to the Commission that it will authorize an action against a subsidiary of the
Company and two senior officers relating to the frequent trading issues that are
the subject of the SEC's investigation. These issues were previously referenced
as being under review by the Company in its Annual Report on Form 10-K and its
public website. The Company currently is in discussions with the SEC Staff in an
effort to resolve the issues raised in their investigation. Such discussions are
preliminary and the Company cannot predict the likelihood of whether those
discussions will result in a settlement and, if so, the terms of such
settlement.
The Company cannot predict with certainty the eventual outcome of the
foregoing Massachusetts administrative proceeding or other governmental
investigations, nor whether they will have a material negative financial impact
on the Company. However, public trust and confidence are critical to the
Company's business and any material loss of investor and/or client confidence
could result in a significant decline in assets under management by the Company,
which would have an adverse effect on future financial results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRANKLIN RESOURCES, INC.
(Registrant)
Date: February 6, 2004 /s/ Martin L. Flanagan
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Martin L. Flanagan
President and Co-Chief Executive Officer