2000 to 2006
The year 2000 marked the beginning of a gradual asset value decline that took Putnam's asset value from $400 billion to $192 billion.
In October 2003, the Securities and Exchange Commission (SEC) and the Massachusetts Secretary of State each filed separate civil complaints against Putnam, alleging that the company's portfolio managers, along with some preferred clients, had engaged in the rapid trading of some of Putnam's mutual funds. A few days later, Lasser resigned, and Charles "Ed" Haldeman, director of one of the company's investment divisions, was promoted to chief executive.[6] In early 2004, the company admitted allowing its portfolio managers and some investors to market time its funds. Under agreements with the SEC and the Secretary of the Commonwealth of Massachusetts, Putnam paid $110 million in fines and restitution to settle charges with the state and federal regulators.[7] After allegations of improper trading became public, Putnam's investors withdrew at least $28 billion from its stock and bond funds over six months.[4] By May, 70 civil actions had been filed against Putnam for allegedly engaging in improper trading.[4]
Between 2003 and 2007, Haldeman initiated broad changes within the company. He created a new set of guiding principles for the company and reduced the company's staff by 11 percent, including eliminating 25 of the highest-paid executive positions. He reduced senior management compensation to half of what it was in 2000 and adjusted portfolio managers' compensation to encourage more long-term thinking and planning.[6]
In 2005, Putnam paid $40 million to settle charges made in 2003 that it "did not tell fund investors or directors about paying" brokerage firms for recommending its mutual funds to clients. Afterward, some investors withdrew their funds. This settlement was the final resolution in an investigation of Putnam's payments to 80 brokers conducted over three years.
In 2006, 48 percent of Putnam's mutual funds scored in the top 50 percent compared with funds in their peer group, an increase of 8 percent from two years prior.[6] However, that same year, an SEC lawsuit accused several former employees, including their transfer agency chief, of "defrauding several mutual funds and a corporate retirement plan of $4 million" so they could "cover up an investment-processing error." The lawsuit was about an asset transfer to the Cardinal Health plan that was intentionally delayed by one day in January 2001. After failing to take advantage of a $4 million windfall, Putnam executives covered up the incident and attributed the loss to other mutual funds.[8]
2007 to Present
In February 2007, Great-West Lifeco, which is controlled by Power Corporation of Canada, announced it would acquire Putnam Investments, a "troubled mutual fund manager," from the Marsh & McLennan Companies for the approximate price of $3.9 billion.[9][10] The acquisition of Putnam was motivated by Great-West Lifeco's 2005 decision to expand into the United States.[9] The following month, Putnam received the 2007 Optimas Award for Ethical Practice in recognition of its then-recent efforts to create a more ethical company culture.[6]
In June 2007, two of Putnam's former managing directors agreed to each pay a $400,000 civil penalty to settle charges of improper trading of mutual fund shares, according to the Securities and Exchange Commission. The two directors also agreed to a one-year suspension from any role as an investment advisor. They settled their charges without any admission or denial of guilt.[11]
