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Spitzer subpoenas Putnam over rebates

New York State Attorney General Eliot Spitzer has subpoenaed Putnam Investments again, this time in search of information about fee rebates given to select clients, according to a regulatory filing.
/ Source: Reuters

New York State Attorney General Eliot Spitzer has subpoenaed Putnam Investments again, this time in search of information about fee rebates given to select clients, according to a regulatory filing.

Putnam said in a quarterly filing with the U.S. Securities and Exchange commission on Monday that it received subpoenas from the Massachusetts Securities Division, which had previously been reported, and Spitzer's office.

The subpoenas relate "to plan expense reimbursement agreements between Putnam and certain multi-employer deferred compensation plans which are Putnam clients," said the filing from Putnam's parent, Marsh & McLennan Cos.

The subpoenas also relate to Putnam's relationships with consultants retained by the same deferred compensation plans.

As it did early last month when Massachusetts regulators said they were looking at the issue, Putnam said the practice of reimbursing some retirement plans fees was widespread.

"Plan expense reimbursement agreements are straightforward agreements which are commonly used across the deferred compensation industry," Putnam spokeswoman Nancy Fisher said.

Industry watchers have also said that such agreements were not rare in the financial world as a whole.

"The basic idea has gone on in the whole financial services world," said Lou Harvey, president of Boston-based research firm Dalbar Inc. "This is more of the witch hunt against the mutual fund industry."

He added that regulators are trying to fix "something fundamentally wrong" with the mutual fund industry but that it has involved "all kinds of shenanigans" in recent months.

In April, Boston-based Putnam, the No. 6 U.S. mutual fund company and the first to be charged with securities fraud in an industry-wide probe last fall, agreed to pay federal and state regulators $110 million to settle charges that some managers and clients engaged in market timing.

The trading method consists of rapid-fire buying and selling of mutual fund shares to exploit pricing inefficiencies. While technically legal, firms widely discourage the practice, which has made authorities crack down on an alleged double standard at many companies.