The trustees of the Putnam mutual funds group on Tuesday said management oversight of employee trading was ineffective and its response to employee trading abuses was inadequate.
The report, prepared by the audit and pricing committee of the Putnam board of trustees in response to the mutual fund trading scandals that erupted last year, also said Putnam Investments should have been more vigorous in monitoring and deterring excessive short-term trading in the 401(k) plans Putnam Fiduciary Trust Co. administered.
A summary of the audit committee's investigation was released in a statement. Details of specific findings were not provided in the statement but the panel said they would be provided to fund shareholders.
The investigation found that employee trading abuses violated the company's code of ethics, and management failed to inform the funds' independent trustees of employee trading abuses in a timely manner.
Putnam, the nation's sixth biggest mutual fund company and a unit of Marsh & McLennan Cos. Inc., should seek restitution for fund shareholders for costs incurred due to inappropriate employee trading, the report said.
Despite criticism of lax oversight, the report found no evidence that Putnam established formal "market-timing" or late-trading agreements with certain traders.
It also made efforts to deter excessive short-term trading in its funds, a move that resulted in trading firms such as Canary Capital to decline to invest in Putnam funds.
