Putnam Investments could pay penalties and fines in the hundreds of millions of dollars, according to an SEC legal brief, The New York Times reports today.

But given that the six Putnam employees who engaged in improper trading made just over $1 million, as well as the fact that the SEC will take into consideration the $54 billion that has left Putnam since the scandal erupted, the firm calls the figure out of bounds.

The SEC’s argument is "a transparent attempt to find a way to reach a headline-making number," Putnam said, in an SEC filing.

However, the SEC’s brief, as well as an internal report to Putnam’s board that the firm made public yesterday, revealed that three top employees, including the CEO, the CIO and the chief compliance officer, were aware of the wrongdoing – but kept quiet. The SEC charged that the top executives intentionally protected other executives and, more importantly, the firm’s assets and subsequent management fees.

"By concealing its fraud, Putnam unjustly received massive amounts of management fees during nearly four years in which it continued to operate its business as usual," the NYT quotes the SEC filing as saying. In addition to the possibility the SEC might ask the firm to repay the fees it collected during this time, the Commission said it might also ask for repayment of the fees Putnam collected on the $100 million or so that the six employees, including four portfolio managers, market timed.

__

 

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.