A consultant working for regulators says problems in Putnam Investments mutual funds could have cost investors about $100 million between 1997 and 2003.[@@]

Regulators hired the consultant to implement a provision in a settlement agreement that Putnam, Boston, reached with the Massachusetts Securities Division and the U.S. Securities and Exchange Commission in April 2004.

Putnam negotiated the agreement to address regulators’ allegations that it may have let portfolio managers make illegal use of its funds to “time the market” through rapid trades.

The agreement called for Putnam to disgorge $5 million in gains and pay a $50 million civil penalty, and it also called for the appointment of a consultant to develop a plan for distributing the funds to investors.

The consultant, Peter Tufano, a professor at the Harvard Business School, estimates improper trading by Putnam’s employees cost shareholders at least $3 million and investors in Putnam retirement plans and 529 college savings plans $46 million, according to a spokesman for William Galvin, Massachusetts secretary of the commonwealth.

The spokesman says he could not say more about the report because it is not yet complete.

Putnam has issued a statement of its own saying the company cannot comment on the consultant’s work because it is not yet complete. The goal of the review process is to ensure that Putnam investors receive full compensation for trading issues raised in 2003, Putnam says.

At press time, the consultant, Peter Tufano, a Harvard Business School professor, could not be reached for comment. David Bergers, an official in the SEC’s Boston office, declined to comment.

Putnam, a unit of Marsh & McLennan Companies Inc., New York, ended January with about $204 billion in assets under management, down from $240 billion in assets under management at the end of 2003.

The parent company, Marsh, reached an $850 million agreement with New York Attorney General Eliot Spitzer and New York insurance regulators Jan. 31. That agreement settled a brokerage commission investigation.