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Putnam Trustees Fault Employee Oversight, Find No Evidence of Deals

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BOSTON (–Outside trustees found no evidence that Putnam Investments officials entered into agreements or had understandings with outside investors, such as hedge funds, to allow late timing of its mutual funds.

The trustees also found no evidence of Putnam accepting investment in mutual funds in exchange for allowing investors to actively trade Putnam funds, according to a statement from the trustees.

But the trustees did find unsatisfactory monitoring and controls regarding Putnam’s own employees’ trading and for selected 401(k) accounts.

The trustees concluded that the “monitoring of employee trading was ineffective and that management’s response to employee trading abuses was inadequate.” They also concluded that Putnam “should have been more vigorous in monitoring and deterring excessive short-term trading” in the 401(k) plans administered by Putnam.

The investigation followed the October filing of a civil lawsuit by Massachusetts Secretary of the Commonwealth William Galvin regarding the trading of Putnam mutual funds by two of its portfolio managers Previous HedgeWorld Story.

Brian McNiff, a spokesman for the Secretary’s office, said the Putnam report has no effect on Massachusetts’ investigation. “It was nothing we asked for. It’s theirs,” Mr. McNiff said.

He also said Putnam still is under investigation by Mr. Galvin’s office.

The Putnam trustee report tried to differentiate Putnam’s situation from others in the industry by highlighting the fact that it found no evidence suggesting Putnam was doing deals to get sticky assets and that there were no late trading arrangements.

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