Franklin Resources stock sinks as SEC probes $2 billion unit’s Co-CIO

Key recommendations

• Ken Leech, co-CIO of a Franklin Resources unit, took a leave of absence after receiving a Wells notice from the Securities and Exchange Commission (SEC).

• The departure came as the company and federal regulators investigated certain past trade allocations in some Western Asset Management accounts.

• Western Asset said in light of Leech’s departure it had closed its Macro Opportunities fund in what it called the “best interests” of clients.

Franklin Resources (BEN) was the worst-performing stock in the S&P 500 on Wednesday after the investment manager reported that Ken Leech, co-chief investment officer (CIO) of its Western Asset Management unit, was on leave after receiving a Wells notice from the Securities and Exchange Commission (SEC).

In a filing with the SEC, Western Asset Management said that due to Leech’s departure, it determined it would be “in the best interest of clients” to close the Macro Opportunities fund, which had approximately $2.0 billion in assets under management (AUM) starting on July 31.

Franklin had announced an internal investigation last month

In a regulatory filing last month, Franklin Resources said it had launched an internal investigation into “certain past trading allocations of treasury derivatives in certain accounts managed by Western Asset Management.” He explained that the company is also cooperating with parallel government investigations by the SEC and the US Department of Justice (DOJ). Franklin Resources added on Wednesday that it would “take the necessary action” following its investigation.

Western Asset said co-CIO Michael Buchanan, who shared the role with Leech, will now be CIO.

Shares of Franklin Resources fell 8% as of 2:45 PM ET Wednesday to $20.81, the lowest since November 2020. They are down 30% in 2024.

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