Following The Boston Globes report Tuesday that
Galvins investigation into the mutual fund industry mirrors that of New York Attorney General Eliot Spitzer. Sources told The Globe that Putnam will be charged with allowing certain clients to rapidly trade in and out of its funds. As a result, the nations fifth-largest mutual fund firm gave those investors an unfair advantage over other shareholders.
Putnam issued a statement Tuesday saying it has detected that three of its clients engaged in market timing but that none engaged in late trading. The simultaneous acts of allowing investors to rapidly trade and not allowing others to rapidly trade both constitute civil fraud under Massachusetts law. Over the last two months, the mutual fund industry has come under relentless attack by Spitzer and Galvin for allegedly unfair trading practices, marking the first time it has undergone sustained legal pressure.
