Putnam's Parent Shells Out $24M

February 2, 2004 (PLANSPONSOR.com) - Putnam Investments' parent company has shelled out $24 million in the fourth quarter in restitution for its fund trading scandal involvement and other costs.

Insurance broker Marsh & McLennan Companies revealed the payment in its fourth quarter financial report, which included Putnam, a ccording to a Bloomberg News report.  Putnam has been hemorraging money ever since October when federal and state regulators accused the Boston-based fund firm of improper trading.

In the final quarter, individual investors, pension funds and retirement plans pulled out $53.7 billion more than they put in, about 20 times the $2.7 billion outflow of the previous three months. Putnam’s managed assets declined $32 billion, to $240 billion, in the fourth quarter.  Assets are up about $1 billion so far this month as redemptions have slowed, Marsh & McLennan said.

Putnam was the first fund company to be accused of wrongdoing as the US Securities and Exchange Commission, the attorney general of New York and the secretary of the Commonwealth of Massachusetts investigated the mutual fund industry for late trading and market timing.

The SEC and Massachusetts regulators asserted that two former Putnam executives took advantage of inside knowledge about the international funds they managed to generate quick profits for themselves at the expense of customers. Putnam also failed to properly supervise the money managers, the SEC said.

Putnam settled the SEC lawsuit in November, agreeing to make restitution to investors, add independent directors and limit trading by employees, without admitting any wrongdoing. Putnam also said recently that it planned to cut fees and increase disclosure on funds to win back customers.

The SEC is still determining a fine, and Marsh & McLennan has not yet set aside money for it, the company said.