Ex-Putnam managers to settle, pay $1.5m
Two former fund managers for Putnam Investments of Boston agreed to pay a total of $1.5 million to settle allegations they inappropriately traded mutual fund shares and potentially harmed other fund investors, federal and state regulators said yesterday.
The deal ends one of the chief prosecutions still remaining from a period of deep scrutiny of Putnam, which is being purchased by Canada's Power Corp.
The former managers, Justin Scott, 49, of Marblehead and Omid Kamshad, 44, of London neither admitted nor denied the allegations as part of the settlement, the Securities and Exchange Commission said. The payments will be split between that agency and the office of Massachusetts Secretary of State William F. Galvin, officials said. Scott's attorney, Jack Silvia of Mintz Levin, said "Mr. Scott is pleased to have this matter resolved." Kamshad's attorney, James J. McGuire, said the settlement was among "the lightest and least Draconian" of any stemming from investigations of mutual fund practices. "We believe the SEC's offer reflects the strength, or lack thereof, of the case against Mr. Kamshad. Mr. Kamshad is very pleased to put this matter behind him."
Other executives have also struck deals with regulators including former Putnam chief executive Lawrence Lasser, who was forced to resign in 2003. Much of the scrutiny related to a practice known as "market timing" in which some insiders traded rapidly in and out of international funds to take advantage of outdated prices of certain stocks.
Scott and Kamshad weren't charged with market timing but rather with what the SEC called excessive "short-term trading" of mutual funds including some over which they had investment authority from 1998 to 2003. These trades allegedly took advantage of inefficiencies in the way mutual fund prices are determined, potentially at the expense of fund shareholders.
"Mutual fund managers are obligated to act in the best interests of the funds. The SEC alleged in this case that the defendants engaged in personal trading that was inconsistent with the best interests of the mutual funds they managed on behalf of investors. All mutual fund investors -- large or small, wealthy or not -- are entitled to a level playing field," said David Bergers, head of the SEC's Boston office.
Ross Kerber can be reached at kerber@globe.com. 
