SEC Boston chief quits over Putnam

The SEC, in a statement, said Marcelino left due to "recent press coverage of certain matters involving the Boston Office."

The resignation comes after Putnam chief executive Lawrence J. Lasser quit in the wake of state and federal fraud charges against his firm. The regulatory actions against Putnam were begun by state securities regulators, not the SEC, which has come under increasing fire for lagging state regulators in their scrutiny of mutual funds and the securities industry.

Some securities lawyers said Marcelino was a scapegoat for problems higher up at the agency, but other people said Putnam was not the first high-profile case to create embarrassment for the Boston office.

According to an Oct. 24 column in the Globe, the SEC had information about alleged improper trading activities at Putnam as far back as March from a whistle-blower who spent 2 1/2 years at the mutual fund company, the country's fifth-largest. The whistle-blower, Peter Scannell, provided documents showing a pattern of market timing by some of Putnam's customers.

Phil Koski, the SEC attorney who spent an hour with Scannell, promised to follow up with the former Putnam employee but never did, according to the Globe column. On Sept. 11, Scannell took his documents to the Massachusetts Securities Division. Within hours, the office, led by Secretary of State William F. Galvin, had issued subpoenas seeking information from Putnam.

The Wall Street Journal followed with a major story of its own, published last week, outlining how Scannell first went to the SEC and then took his information to the state securities office.

Galvin's office, and the SEC, last week filed civil charges against Putnam.

Market timing involves excessive short-term trades in mutual funds to take advantage of price inefficiencies.Such rapid trading lowers returns for other investors.

Reached at his home last night, Marcelino said, "I resigned, but other than that I can't comment."

In the statement released yesterday afternoon, the SEC said, "Mr. Marcelino indicated that he had decided to step aside as the district administrator, given the recent press coverage of certain matters involving the Boston office, to minimize any further distractions for his staff as they continue the critical work of the office."

A spokesman for the SEC in Washington declined to comment beyond the agency's statement.

Marcelino took charge of the Boston office in 1993 after 10 years as a staff attorney in the SEC's Division of Enforcement in Washington. The Boston office handles regulation and enforcement throughout New England.

Marcelino kept a low public profile, even for an agency as averse to publicity as the SEC. He rarely returned reporters' calls without having other staff members listening in on speaker phones. Marcelino made only a handful of public appearances in his tenure.

The agency, in its statement, said Marcelino "directed a number of high-profile investigations."

Some cases did not work out well. In 1994, the Boston office of the SEC interviewed Jason J. Zirkel, a suspected stock swindler, after receiving complaints, but decided not to pursue a case after he told investigators he didn't have a checking account. Later, Zirkel became the subject of an investigation by the Department of Justice. He eventually pleaded guilty to mail and wire fraud charges and received a prison sentence of nearly five years.

Marcelino's resignation comes amid increasing criticism of the SEC's oversight of trading practices at mutual funds. At a Senate hearing yesterday looking into troubles in the industry, Senator Joseph Lieberman, Democrat of Connecticut, said the SEC was "far too late to the table in addressing these problems."

Some securities lawyers said Marcelino should not have been the one to resign.

"If this is the SEC's version of heads rolling related to the mutual fund industry, then the heads should be rolling in Washington, not Boston," said Jacob S. Frenkel, a partner at Smith Gambrell & Russell LLP and a former SEC enforcement attorney. "The responsibility for setting enforcement policy and regulatory policy is exclusively in Washington at the SEC's headquarters."

Jeffrey Krasner can be reached at krasner@globe.com.