Putnam and SEC Reach Agreement

Putnam Investment Management, LLC confirmed on Thursday it had reached agreement with the Securities and Exchange Commission in the administrative and cease-and-desist proceedings focusing on Putnam’s discovery and failure to disclose or control excessive short-term trading by certain Putnam employees.

Under the terms of the order agreed to, Putnam will institute a number of remedial actions. These include new employee trading restrictions, enhanced employee trading compliance, and oversight by an independent third party and the SEC of the calculation of the
amount of restitution to be made by Putnam for losses attributable to excessive short-term trading by Putnam employees.

The actions also include the retention of an independent compliance consultant, the undertaking of periodic compliance reviews, and certification of compliance with the SEC. The order also contemplates civil monetary penalties to be determined at a later date. Certain best practices in corporate governance, some of which are already followed by Putnam funds, are also a part of this agreement.

Under the order, the SEC made certain findings of fact and violations, which Putnam, a subsidiary of Marsh & McLennan, neither admitted nor denied.

“This agreement underscores our commitment to address the issues at Putnam swiftly and thoroughly in the interests of our investors, clients, and employees,” said Charles “Ed” Haldeman, president and CEO of Putnam. “It is another important step toward rebuilding Putnam’s reputation for integrity and reliability with investors.

“The groundbreaking reforms in this agreement will help Putnam realize its goal of being the standard-bearer for professional and ethical conduct in our industry. We are already implementing many of these reforms and will move quickly to implement all of the reforms in the agreement.

“We announced previously that we would make restitution for losses to our funds from improper short-term trading by Putnam employees. This order establishes a mechanism for doing so fairly and impartially under a specially appointed independent assessment consultant. All costs associated with the order, including expenses related to the new reforms, will be borne entirely by the management company, not by Putnam investors. We believe in the quality and integrity of the people at Putnam, and we believe in Putnam’s future.”

Haldeman added, “We regret deeply that investors’ confidence in Putnam has been shaken by the practices that surfaced. The individuals that have been identified as having engaged in improper short-term trading are no longer managing money at Putnam. We are confident that the steps we are taking will make Putnam a better business with a strengthened ability to serve investors and clients. Our number one priority is managing the money that has been entrusted to us and delivering consistent, dependable, superior investment performance over time. We are grateful for the support many of our investors have shown to us over the course of the past several weeks and for the dedication and commitment of our people.”