Tuesday, November 04, 2003

Putnam - My Pension Fund - Going Under?

This is the official law suit filed by the S.E.C. against Putman traders, Justin M. Scott and Omid Kamshad, for insider self-dealing. To say the least, I am a little worried about my recently drawn pension. Will it survive? ...Update: My pension fund directors fired Putnam 11-4-03.

FindLaw -- S.E.C. v. Justin M. Scott and Omid Kamshad

Excessive Short-Term Trading
14. Excessive short-term trading in mutual funds can be detrimental to long-term shareholders in those funds. Such trading can dilute the value of mutual fund shares to the extent that a trader may buy and sell shares rapidly and repeatedly to take advantage of inefficiencies in the way mutual funds prices are determined. Dilution could occur if fund shares are overpriced and redeeming shareholders receive proceeds based on the overvalued shares. In addition, short-term trading can raise transaction costs for the fund, it can disrupt the fund's stated portfolio management strategy, require a fund to maintain an elevated cash position, and result in lost opportunity costs and forced liquidations. Short-term trading can also result in unwanted taxable capital gains for fund shareholders and reduce the fund's long-term performance. In short, while individual shareholders may profit from engaging in short-term trading of mutual fund shares, the costs associated with such trading are borne by all fund shareholders. Consequently,investment advisers often maintain policies and procedures to detect and prevent market timing and other short-term trading.

Short-Term Trading by Putnam Employees
15. Beginning in at least 1998, Justin M. Scott, managing director and chief investment officer of Putnam's International Equities Group, and Omid Kamshad, managing director and chief investment officer of Putnam's International Core Equity Group, engaged in repeated short-term trading of Putnam mutual funds in their personal accounts. Scott's trading continued until at least mid-2000; Kamshad's trading continued into 2003. Both Scott and Kamshad engaged in short-term trading in their personal accounts of mutual funds over which they had investment decision-making responsibility and about which they had access to non-public information regarding, among other things, current portfolio holdings, valuations and transactions not readily available to all fund shareholders. ...S.E.C. Law Suit Continued

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