Putnam Investments

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Putnam Investments
Type Subsidiary
Founded 1937
Headquarters Boston, Massachusetts
Key people Robert L. Reynolds, CEO
Industry Financial services
Products 401ks, mutual funds, retirement plans
Revenue $359 million (2006)
Employees 2,600+[citation needed]
Parent Power Financial
Website www.putnam.com

Putnam Investments was founded in 1937 by George Putnam. At the same time, he founded its first mutual fund offering, The George Putnam Fund of Boston.[1] Putnam has offices in London and Tokyo, and its headquarters is located in Boston, Massachusetts.

From 1970 to 2007, Putnam was a subsidiary of Marsh & McLennan Companies (MMC)[2], a global financial services firm. On February 1, 2007, MMC announced[3] that Putnam would be acquired by Great-West Lifeco Inc., a subsidiary of Power Financial Corporation, a Montreal-based company with interests in the financial services industry globally and nearly $100 billion in assets under management. The purchase was completed on August 3, 2007 for a price of approximately $3.9 billion.[4]

As one of the largest mutual fund complexes in the United States, Putnam has nearly $101 billion in assets under management, 119 institutional clients, and over 7 million shareholders and retirement plan participants as of 2007.[5]

Contents

[edit] Regulatory issues

The company was involved in the mutual fund scandal of 2003 and admitted to allowing its portfolio managers and some investors to market time its funds. Under agreements with the U.S. Securities and Exchange Commission (SEC) and the Office of the Secretary of the Commonwealth of Massachusetts (William Galvin), Putnam paid $193 million in fines and restitution [6] to settle charges with the state and federal regulators. Total assets at Putnam dropped substantially in light of these events.[7]

Since November 2003, Putnam has implemented reforms and changes including replacing CEO Lawrence Lasser, (who was paid a severance package of $78 million and a promise the company would pay his future legal bills) with Ed Haldeman (who was paid $28 million in his first two years), [8] as well as, new appointments for CAO, COO, CFO, General Counsel, and compliance officer. On June 10, 2008 it was announced Bob Reynolds will take over as CEO while Mr. Haldeman will be Chairman. Mr. Reynolds is the former COO of Fidelity and helped build the firm into a powerhouse.

In addition, Putnam was the first mutual fund company to implement "Mutual Fund Protection Principles", an industry standard for compliance and investor protection[9]. Putnam has gone to great lengths in disclosures to salvage its reputation[10] and has won acclaim for dedication to compliance issues and ethics[11] for these efforts.

[edit] The Whistleblower

``Massachusetts investors owe a debt of gratitude to Peter Scannell, who first brought to light the yawning gap between what Putnam declared in their prospectus and the actual conduct the firm allowed," Secretary of State Bill Galvin said in bringing the case. Added Matt Nestor, then head of the state's securities division: ``This would not have started without him. We owe him a debt of gratitude."[12]

According to the January 27, 2004 testimony[13] he gave in to a Senate Subcommittee on Financial Management, Budget, and International Security, U.S. Senate Committee on Governmental Affairs in Washington, Peter Scannell was making $45,000 a year at a Putnam call center in Quincy, MA when he noticed favored customers were making big, quick profits by rapidly trading in and out of funds, a practice that is legal but hurts long-term investors.[14] He had repeatedly gone to his supervisors at Putnam to air his concerns about market-timing abuses in certain investment mutual funds, before contacting the SEC in the spring of 2003. He had to turn to Secretary of the Commonwealth of Massachusetts Bill Galvin’s office before an enforcement action finally was pursued against Putnam. Boston SEC chief resigned. Scannell believed someone at the SEC tipped off a Putnam executive, prompting the Boston fund firm to quickly change the names of the mutual funds targeted for market timing. Before going to the SEC, he was assaulted while drinking coffee in his parked car on a cold, snowy night. A burly, bearded man with a boilermakers shirt repeatedly smashed Scannell’s head with a brick, yelling at him about Putnam and knocking him unconscious. He ended his career in financial services. On February 6, 2009, SEC Inspector General H. David Kotz confirmed that his agency has been in touch with Scannell and is actively conducting an investigation into his allegations. [15][16]

[edit] Money market fund liquidation

On September 18, 2008, Putnam directors voted to liquidated its institutional money market fund and return capital to investors [17]. The decision was made in concern to large withdrawals brought about by liquidity concerns in the market, and the financial collapse of Lehman Brothers and Bear Stearns. The moved was hailed as shareholder friendly by Morningstar.

[edit] See also

[edit] References

  1. ^ A Time Honored Tradition Putnam webpage. Retrieved April 30, 2007.
  2. ^ MMC History
  3. ^ Press Release "Putnam Investments to be acquired by Power Financial Corporation Subsidiary". February 1, 2007.
  4. ^ http://www.mmc.com/news/pressReleases_300.php
  5. ^ Putnam At A Glance. Putnam webpage. Retrieved April 30, 2007.
  6. ^ http://www.boston.com/business/articles/2006/09/27/justice_vs_the_law/
  7. ^ NPR Ethics Probe Jars Mutual Fund Industry. November 8, 2003.
  8. ^ http://www.boston.com/business/articles/2006/09/27/justice_vs_the_law/
  9. ^ Doing What's Right For Investors Putnam webpage. Retrieved April 30, 2007.
  10. ^ Investment News Putnam OKs disclosure demands. September 23, 2004.
  11. ^ Workforce Management Optimas Award Winner for Ethical Practice. March 26, 2007.
  12. ^ http://www.boston.com/business/articles/2006/09/27/justice_vs_the_law/
  13. ^ http://hsgac.senate.gov/public/_files/012704scannell.pdf
  14. ^ http://www.boston.com/business/articles/2006/09/27/justice_vs_the_law/
  15. ^ http://www.patriotledger.com/business/x185007687/MASS-MARKET-SEC-leadership-is-key-to-restoring-investor-confidence
  16. ^ http://www.usatoday.com/money/perfi/funds/2003-11-20-whistleblower-1a-cover_x.htm
  17. ^ Putnam Money Market Fund to Liquidate as Investors Rush to Sell Los Angeles Times

[edit] External links

Retrieved from "http://en.wikipedia.org/wiki/Putnam_Investments"