Putnam to Settle Improper Trading Charges
The settlement includes $55 million to compensate shareholder loses, $5 million in restitution, and $50 million in penalties to the Commonwealth of Massachusetts.
“These settlement agreements with the SEC and (Massachusetts) Secretary (of State William) Galvin’s office reflect our commitment to put these matters behind us and continue to move forward as a firm focusing on rebuilding investor confidence and delivering consistent, dependable, superior investment performance over time,” said Ed Haldeman, president and chief executive officer of Putnam.
Putnam had been accused of failing to stop its own fund managers from making illegal trades that diminished the returns for other shareholders. Employees had traded international funds in different time zones for their own benefit, taking advantage of market events occurring after U.S. prices closed and buying at prices that were unavailable to the general public.
“This case uncovered a corporate culture that turned a resolute blind eye to the most egregious conduct on the part of its managers who indulged in market timing, as well as the favored fund participants who were allowed to market time at the expense of other shareholders,” said Galvin.
The practice of market timing and late trading is believed to cost small investors billions of dollars.
The Massachusetts Securities Division had filed a complaint against Putnam last October, making it the first formal allegation of wrongdoing against a mutual fund company in the market timing scandal.
Fund companies including Bank of America, Bank One, Janus, Strong Capital Management and many others have been accused of the practice.
In March, Bank of America and FleetBoston Financial reached a record $675 million settlement to resolve charges they helped favored clients trade mutual funds improperly at the expense of ordinary investors.