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On August 21, 2024, Franklin disclosed in a filing with the U.S. Securities and Exchange Commission (“SEC”) attaching a press release issued by Western Asset Management Co. (“Western Asset”), a subsidiary of Franklin, that the co-Chief Investment Officer of Western Asset, Ken Leech, “recently received a Wells Notice from the Staff of the U.S. Securities and Exchange Commission, and is on a leave of absence to focus on this matter.”  Western Asset “is also cooperating with parallel government investigations.”  According to an August 21, 2024 Bloomberg article both the SEC and Department of Justice are investigating.

Following this news, the price of Franklin fell $2.84 per share, over 12%, to close at $19.78 per share on August 21, 2024, the largest single day drop since October 2020.

On August 28, 2024, Bloomberg reported that “the [SEC] is investigating Leech’s trades over a three-year period” and that “Federal prosecutors are probing whether profitable trades were given to some clients over others.”

Then on September 5, 2024, Barron’s reported it had “learned from a person familiar with the matter that the SEC’s investigation focuses on three strategies Leech managed. Each strategy has a mutual fund version with different share classes -- Western Asset Core Plus Bond, Western Asset Core Bond, and Western Asset Macro Opportunities -- as well as multiple separate accounts overseen by Leech, totaling 38 accounts in all.”  Further, Barron’s reported that “[a]ccording to Morningstar, in the 12 months ended on July 31 before Leech’s departure, the now $17 billion Western Asset Core Plus Bond and the now $12 billion Western Asset Core Bond funds experienced $6.3 billion and $2.9 billion in shareholder outflows, respectively” and that “[t]he $165 million Western Asset Macro Opportunities fund was more than cut in half, losing $168 million.”

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If you have any questions about this investigation, please contact:

CONTACT:

Pamela A. Mayer
KAPLAN FOX & KILSHEIMER LLP
800 Third Avenue, 38th Floor
New York, New York 10022
(646) 315-9003
pmayer@kaplanfox.com

Laurence D. King
KAPLAN FOX & KILSHEIMER LLP
1999 Harrison Street, Suite 1560
Oakland, California 94612
(415) 772-4704
lking@kaplanfox.com