A panel of Commissioners of the Ontario Securities Commission today approved a settlement agreement with Franklin Templeton Investment Corp. that will result in $49.1 million being distributed to mutual fund investors who suffered harm from market timing activities in certain funds managed by Franklin Templeton.

The settlement agreement was reached earlier this week by OSC staff and Franklin Templeton.

The agreement said that the conduct of the fund manager — in failing to protect fully the best interests of the relevant funds — was contrary to the public interest.

The settlement found that between February 1999 and February 2003:

  • the total profit realized in Franklin Templeton Funds by the market timing traders was approximately $120.8 million;
  • the market timing traders achieved a return on their overall investment in the relevant funds that was significantly higher than the return that long-term investors would have achieved on their investments in the relevant funds in the same period;
  • in connection with the trading by the market timing traders, Franklin Templeton charged management fees to the relevant funds of approximately $4.6 million; and
  • no fees were charged by Franklin Templeton to the market timing traders.



Together with payments arising from four other settlement agreements approved Dec.16, 2004, the OSC says a total of $205.6 million will be repaid to investors harmed by market timing activities. The other companies to settle with the OCC were CI Mutual Funds Inc., AGF Funds Inc., I.G. Investment Management, Ltd., and AIC Ltd.

The repayments are a result of the OSC’s extensive probe into trading practices in mutual funds, completed in December 2004.

“We kept the investors as our clear focus throughout the probe,” said OSC Chair David Brown, in a release. “Our sweeping approach had us scrutinize every fund manager with funds available to investors in Ontario. The result is an unprecedented $205 million being returned to the investors – and an end to market timing activities in the mutual fund industry.”

No evidence of ongoing market timing activity has been found since the review of the Canadian mutual fund industry began in November 2003. In the probe, OSC staff did not uncover any evidence of late trading.