Putnam Fires 9 for Improper Trading
The mutual fund firm has terminated a total of 15 workers since it became the focus of federal and state probes.
Putnam Investments said Tuesday that it fired an additional nine workers for improper mutual fund trading, bringing to 15 the number of staff members let go since the Boston firm became the focus of state and federal probes in September.
Ed Haldeman, the company’s chief executive, said in a letter to investors the nine employees were terminated after a review of six years of trading activity in Putnam funds.
He also indicated that the fifth-biggest fund firm now was hoping to put the trading scandal behind it. “With all aspects of employee trading now public, Putnam is ready to move forward as a firm,” Haldeman said.
But Massachusetts’ chief securities regulator, William Galvin, said he wasn’t in settlement talks with Putnam and that its report Tuesday bolstered his view that the firm was lax about policing so-called market timers.
“We are continuing our investigation and think this illustrates the need for us to do so,” Galvin said.
Putnam in October became the first mutual fund company charged with securities fraud in the widening industry scandal. Federal and Massachusetts regulators alleged that the company allowed some of its fund managers, and certain clients, to make market-timing trades in its funds despite an official policy against such trades.
Market timing aims to take advantage of temporary pricing inefficiencies in fund shares, particularly in portfolios that own foreign stocks. The practice isn’t illegal, but most fund companies say they discourage it because it can raise portfolio costs and effectively skim profits from longer-term investors.
Putnam settled the federal case against it Nov. 13 by agreeing to reforms and to a fine to be determined later. But Galvin’s case still is outstanding.
In his letter Tuesday, Haldeman said none of the nine additional employees who were fired was a portfolio manager, though their jobs weren’t revealed. He also said the company’s review determined that Putnam had not entered into any agreements or financial arrangements with clients to allow market timing or “late trading” of funds.
Other fund firms that have been implicated in the scandal allegedly had deals to allow timing by certain clients in return for more business.
In addition to the nine fired employees, Putnam said it had discovered that six former workers engaged in improper trading in a coordinated way. The firm turned information about the six over to state and federal regulators, Haldeman said.
Some other current employees who had engaged in improper trading were warned without being fired, he said. Those people either didn’t know about Putnam’s trading policies or stopped making improper trades when they were told to, Haldeman said.
Putnam said its review looked at trading by 12,700 employees between January 1998 and October 2003.
Shares of Putnam’s parent, Marsh & McLennan Cos., rose 3 cents to $45.35 on the New York Stock Exchange on Tuesday.
