Putnam Drops Boilmakers K Plan

December 8, 2003 (PLANSPONSOR.com) - The union 401(k) plan that landed Putnam Investments in legal hot water has been dropped by the Boston-based mutual-fund firm.

Putnam sent a letter to Boilermakers Union, Local 5 in New York last month notifying the union it had 60 days to find a new investment manager of the union’s 401(k)-style retirement plan.   John Brown, head of Putnam’s institutional business said in a statement that the termination was “consistent with the many steps that Putnam is taking to enforce strict overall trading policies to protect the interests of our long-term shareholders,” according to a Dow Jones report.

It was the union’s trading activities, though, that helped attract the attention of regulators to alleged market timing and late trading activities in Putnam’s mutual funds.   In October, Massachusetts Secretary of State, William Galvin contended that Putnam participated in market timing within the union’s accounts that allowed certain mutual fund holders to trade frequently, while refusing to let others do the same (See  Union K Plan Trading Activity Leads to Putnam Fund Probe ).   This in turn led to civil securities fraud charges   being levied against Putnam (See  Massachusetts Fires Putnam From Pension Fund Management ).

Donald McCallion , an attorney for the welfare and vacation fund of Boilermakers Local 5, said he regretted Putnam’s decision, for which he said the investment company provided no explanation.   The move by the investment firm now puts a $40 million plan with 1,000 participants on the request for proposal block.  

Putnam’s move puts a new wrinkle on the recent spate of fund firings related to the market timing and late trading scandal at the Marsh & McLennan Comapnies unit.   For the most part, it has been Putnam on the short-end of investment contracts as public and private customers have been terminating their relationship with the embattled firm.   In all, this has led to an approximate asset loss of $32 billion, or almost 12%, at Putnam in the last month alone (See  Putnam Scandal Outflows Continue ).