SEC Nears Putnam Settlement Total

March 24, 2004 ( - The U.S. Securities and Exchange Commission (SEC) may be nearing a civil penalty against Putnam Investments that could be worth "several hundred million dollars," the New York Times reported.

However, Putnam disputes such a large award saying that punishment does not fit the crime, rather calling the figure “a transparent attempt to find a way to reach a headline-making number,” the Times report said citing a Putnam filing. An administrative judge is set to hear arguments from both sides next month and could ultimately decide on a much lower figure.

Whatever the amount, the penalty would effectively bring to a close Putnam’s ongoing settlement talks with the SEC that began in November of 2003 (See Putnam, SEC Reach Securities Fraud Settlement ).   In the initial settlement reached between Putnam and the SEC, the firm agreed to an undisclosed system of calculation to determine how much shareholders will be owed due to the market-timing strategies, the SEC said in a news release. Further, the mutual fund company agreed to the entry of an administrative order under which it will make “significant and far-reaching corporate governance” changes in the wake of the scandal.

The order also contemplated civil monetary penalties to be determined at a later date, and certain best practices in corporate governance, some of which are already followed by Putnam funds, are also a part of this agreement, according to Putnam.

To date the largest settlement reached in the current market timing and late trading settlement is the $675 million accord reached between Bank of America-FleetBoston and the SEC and New York Attorney General Eliot Spitzer (See  BofA, Fleet Come to Terms with Spitzer, SEC in Fund Probe ).  Other settlements announced to date include MFS (See MFS Scandal Settlement Finalized) and Alliance (See Alliance, Regulators Reach Settlement ). 

Janus Capital

Also nearing a deal with regulators is Janus Capital, the New York Times reports.   The settlement could be reached at the beginning of the month.  

Janus, one of the first mutual fund firms named in the expanding fund trading scandal, has divulged 12 arrangements that allowed for market timing across its domestic mutual fund business in an SEC filing last November following an internal review (See  Janus, Colorado in Settlement Talks ).  Janus, which had been named in the complaint by New York Attorney General Eliot Spitzer as having allowed hedge fund Canary Capital to engage in market timing in certain Janus funds (See  Spitzer Fund Abuse Probe Pumps Out More Subpoenas ), said at the time that “significant, frequent” trading appeared to have occurred in four of the arrangements.