Putnam to Pay More to Settle Trading Case

Putnam Investments said Thursday that it would pay an additional $83.5 million to settle federal and state investigations into mutual fund trading abuses.

Boston-based Putnam, the first fund company formally accused of wrongdoing in the industry scandal that unfolded in September 2003, agreed last spring to pay $110 million in fines and restitution to settle the case.

The additional amount that federal regulators and Putnam announced separately Thursday is the result of new calculations by a consultant hired to tally losses incurred by Putnam shareholders.

The Securities and Exchange Commission and Putnam said a report by Peter Tufano, a Harvard Business School professor, detailed the damage caused by “market timing” and other short-term trading schemes Putnam was alleged to have permitted, and the fallout as some disgruntled investors pulled their money from the company’s funds.

Of the additional harm to shareholders, Putnam said $45.6 million was in “consequential” injury, mostly in higher portfolio transaction costs incurred as fund managers sold securities to cash out investors who left after the trading abuses were revealed.

The total $83.5 million in additional payments will be made to current and former fund shareholders under a distribution plan expected to be made final by the end of summer, Putnam said.

“We are confident that these restitution payments will fully reimburse shareholders for any financial harm they have incurred,” John Hill, chairman of the company’s fund trustees, said in a letter to investors.

Putnam manages about $200 billion in assets. Shares of its parent company, Marsh & McLennan Cos., fell 28 cents Thursday to $31.72 on the New York Stock Exchange.

Separately on Thursday, the Canadian unit of mutual fund giant Franklin Resources Inc. agreed to settle Canadian securities regulators’ charges of market-timing abuses.

The Franklin arm said it would pay 49.1 million Canadian dollars ($39.4 million) covering alleged improper trades from February 1999 to February 2003.

San Mateo, Calif.-based Franklin Resources last year settled market-timing charges brought by U.S. regulators.

The company’s shares slipped 11 cents to $71.84 on the NYSE on Thursday.