Putnam Investment Management of Boston has settled a lawsuit brought against the firm's top executives as well as its mutual fund trustees by The Commerce Group, an insurance holding company in Webster, Mass.
The Commerce Group announced the settlement last week.
The lawsuit, which was filed on April 30 in Massachusetts Superior Court, charged that the defendants breached their fiduciary duty by taking steps to liquidate the closed-end Putnam Dividend Income Fund without first obtaining shareholder approval. As of May 1, The Commerce Group owned 50.1 percent of the fund's shares.
The Commerce Group charged that Putnam's board of directors voted to liquidate the fund in an effort to prevent it from nominating its own slate of board trustees, and potentially seeking Putnam's removal as the fund's adviser. A Putnam spokesperson declined to comment.
Earlier this year, The Commerce Group sent a letter to the fund's board suggesting how the fund could increase its performance, including adding leverage, something that Putnam had removed from the fund about three years ago, said Gerald Fels, executive vice president of The Commerce Group.
In settlement of the lawsuit, Putnam transferred the Commerce Group's pro rata shares of the fund to a newly created, yet unnamed closed-end fund which Commerce Group will manage in-house, said Fels. Commerce Group will appoint a new slate of trustees. Commerce Group is still considering whether to allow outside investors to also invest in the fund, said Fels.