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News November 22, 2004 Issue

Ooops, He Did it Again

Once again, NSMIA notwithstanding, California attorney general Bill Lockyer has charged a fund complex for fraud under state law in connection with its failure to adequately disclose the nature of hard dollar payments made from the complex’s "own resources" to brokers for shelf space.

Lockyer’s November 17 complaint against Franklin/Templeton Distributors also alleged that the group inadequately disclosed directed brokerage arrangements. The company settled for $18 million.

Among other things, Lockyer’s complaint noted that shelf space payments may "create conflicts of interest between investors and the financial professionals with whom they deal."