(Bloomberg) -- Shares of Franklin Resources Inc. fell as much as 7.7% on news that the Commodity Futures Trading Commission is investigating trades at Western Asset Management Co., and that $18 billion of long-term cash had flowed out of that unit last month.
The Franklin unit known as Wamco has had at least $53 billion of outflows since revelations that its longtime trader and Co-Chief Investment Officer Ken Leech was under investigation. Federal authorities are probing whether Leech, who was put on leave, cherry-picked winning trades for favored clients.
A spokesperson for the CFTC declined to comment.
On Monday, Franklin reported adjusted earnings per share for the fourth quarter that missed the average analyst estimate. Shares of Franklin fell 3.5% to $20.19 at 12:54 p.m., recovering some of its earlier losses.
Chief Executive Officer Jenny Johnson said on an analyst call that the US Department of Justice, the Securities and Exchange Commission and the CFTC were conducting ongoing, parallel investigations related to Wamco.
Leech was put on leave in August, after the SEC sent a notification that it may recommend an enforcement action.
“Since the beginning of the investigations, Western Assets’ trading policies have been reviewed by third-party experts,” Johnson told analysts. “Per this review, despite being aligned with industry standards, Western has further enhanced its trading policies and practices.”
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