Franklin looks affected by Betteredge's report. Franklin explains that he wants answers to three questions: Was the diamond the object of a conspiracy in India? Has the conspiracy followed the diamond to England? Did Herncastle mean to put Lady Verinder in the middle of the conspiracy by leaving the diamond to Rachel?

Franklin and Betteredge remain sitting at the Shivering Sands, and Franklin explains how his father, in need of papers that Herncastle held, came to be John Herncastle's executor. Herncastle had also entrusted the diamond to Franklin's father for safe-keeping and left him instructions to hold the diamond safe as long as Herncastle lived and died naturally, but to send it to Amsterdam to be cut up into separate stones in the event of Herncastle's death by violence. Thus Herncastle made the safety of the stone in one piece dependent upon his own safety. Franklin explains that the diamond has a flaw in the center and would have been worth more as separate pieces, so the diamond was wanted in one piece for spiritual, not economic, reasons. This has led Franklin to believe that Herncastle was trying to safeguard his life from the Indians who originally owned the jewel and had followed it to England.

Franklin describes being followed by a dark-complected man when he took the diamond out of the bank in London to bring to Lady Verinder's. Franklin shows Betteredge Herncastle's will, which bequeaths the diamond to Rachel, to be given to her in her mother's presence, as a token of forgiveness for being previously denied entrance to the Verinder's on Rachel's birthday. Franklin still fears that the diamond is meant to bring ill will to Rachel and her family, but concedes that he cannot deny the diamond to Rachel, because it is worth so much money.

Franklin tries to think through the dilemma with Betteredge using both the "Subjective" and "Objective" viewpoints. Betteredge marvels at the many foreign sides of Franklin's character, which make him seem to contradict himself constantly. Betteredge finally advises Franklin to put the diamond into the bank in Frizinghall, a nearby town, until Rachel's birthday next month. Franklin leaves for the bank immediately.

Analysis

Rosanna Spearman is introduced in Chapter IV. Collins is particularly noted for the realistic detail involved with his non-central characters. Thus, Rosanna, being a former thief with a deformity, is something of an outcast. Yet she does not exist as a mere stereotype. Her character is immediately associated with tragedy, and the potential for her character to be central or heroic is expressed in spite of her servant stature. Betteredge explains that "there was just a dash of something that wasn't like a housemaid, and that was like a lady." Rosanna seems to be the outcast counterpart to Rachel Verinder.

Rosanna also explicitly introduces the theme of the haunting of the past in the novel. Rosanna, though reformed from her life of crime, is still plagued by past misdeeds: "My past life still comes back to me sometimes." The persistence of the past, and specifically past misdeeds, is explicit throughout The Moonstone with the main example being the long-standing curse on the stone itself, stemming from a variety of thefts of it. The persistence of a past misdeed can also be seen in John Herncastle's grudge regarding his sister's refusal to admit him to Rachel's birthday. With remarkable persistence, this grudge outlives even Herncastle—he ensures its continuance through his will.