U.S. SEC nudges Franklin Resources toward vote on Sudan holdings

BOSTON Thu Jan 9, 2014 6:11pm EST

BOSTON Jan 9 (Reuters) - U.S. regulators rejected a request by investment firm Franklin Resources Inc to skip a shareholder vote pressuring it to sell off holdings in companies linked to Sudan, whose president faces international war crimes charges.

The decision made public on Thursday by the U.S. Securities and Exchange Commission made it more likely that the company will put the measure on proxy materials to be mailed to shareholders in coming weeks.

Shareholder activists praised the SEC's decision in part because it called their human-rights concerns a "significant policy issue." This wording was stronger than the agency has used when evaluating similar proposals in the past.

"This is big news for us, that we got an explicit endorsement," Eric Cohen, chairperson of resolution sponsor Investors Against Genocide, said in an interview.

A spokeswoman for Franklin Resources said executives were not immediately available to comment on the SEC decision.

Cohen's group has pressed financial companies for years over their investments related to Sudan with mixed results, often facing opposition from executives who say their firms already comply with international law.

But the measures could draw new attention this spring because of recent violence in the oil-rich nation of South Sudan that broke away from Sudan in 2011.

Franklin, of San Mateo, California, had $870.6 billion under management at Nov. 30 and is known for funds that invest in developing markets through firms like the Chinese oil company PetroChina.

PetroChina's parent China National Petroleum Corp operates facilities like oil fields and pipelines in Sudan, where leaders face charges of human-rights violations. Sudan's president Omar Hassan al-Bashir is wanted by the International Criminal Court on genocide charges and other crimes in connection with bloodshed in Sudan's Darfur region.

Citing PetroChina and its parent, the activists' proposal calls on Franklin's board to adopt procedures to avoid investments in companies that "contribute to genocide or crimes against humanity."

Last year Cohen's group got a similar measure on Franklin's proxy ballot, but it won just 9 percent support at the company's annual meeting in March. Franklin had recommended shareholders vote against the measure but had not tried to block the measure altogether.

In November, however, attorneys for Franklin asked the SEC for permission to skip the measure at its 2014 meeting. They argued among other things that the proposal would micro manage the company's decisions and that Franklin has already adopted principles for responsible investing.

The SEC rejected all of the company's arguments, according to a Dec. 30 letter posted to the SEC's website on Thursday and signed by attorney Evan Jacobson.

Jacobson wrote that "In our view, the proposal focuses on the significant policy issue of human rights and does not seek to micro manage the company" so much that Franklin could leave the measure off its 2014 proxy statement.

Jacobson referred questions to the SEC's press office, where a spokeswoman said officials would not comment beyond the letter.

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