The Boilermakers-Putnam saga doesn’t end with market timing. Massachusetts regulators are now looking into whether Putnam issued rebates to favored 401(k) plans, including the Boilermakers’ – and whether trustees of those plans misused the funds, intended for the administrative costs borne by all of the participants in the plan, The Wall Street Journal reports.

Putnam promised the Boilermakers annual rebate checks of $40,000, according to The Journal, citing sources and documents, including e-mails. Among the e-mails regulators are investigating, is one mentioning a $400 check to the Boilermakers for an "annual golf tournament registration fee."

Putnam’s top retirement plan attorney, Ralph Derbyshire, issued a statement saying that in cases where 401(k) plan sponsors absorb administrative costs that could be charged directly to plan participants, Putnam occasionally issues rebates. Further, Derbyshire said, the money comes out of Putnam’s corporate assets, not from the underlying mutual funds’ marketing fees.

If regulators find that the rebates created an unlevel playing field for 401(k) plans, Massachusetts Secretary of the Commonwealth William Galvin said it could open "a new chapter in mutual fund abuse." Rebates, or what Galvin called "payola," represent "one set of rules for insides and one set of rules for everyone else."

One of the reasons that Massachusetts has not yet reached a settlement with Putnam, sources said, is because of Galvin’s ongoing investigation into its 401(k) rebates. On top of this, New York State Attorney General Eliot Spitzer is investigating Putnam’s use of marketing fees in 401(k) plans.


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.

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