State securities officials were probing possible improper market timing at one of Putnam Investments’ international funds.
Secretary of State William Galvin said Monday subpoenas were issued Thursday, regarding trades at the firm’s International Capital Opportunities Fund between January and September 2000. About a dozen individuals at Putnam were asked to provide information.
“This is not a fishing expedition,” said Galvin, whose office oversees the state’s securities division. “We obviously have probable cause of some kind to make these inquiries.”
Nancy Fisher, a spokeswoman for Boston-based Putnam, said the company had “received an inquiry from the state of Massachusetts and are responding.”
The probe follows a similar investigation into market timing at Prudential Securities Inc.’s Boston office. Galvin’s office has also filed a complaint against Morgan Stanley, accusing it of high pressure tactics in getting clients to buy the company’s in-house mutual funds.
Earlier this month, New York Attorney General Eliot Spitzer announced an inquiry into possible illegal trading practices by hedge funds with mutual fund companies, including making deals after the market had closed for the day.
Market timing involves short-term, “in and out” trading of mutual fund shares, which harms the long-term shareholders for whom mutual funds are designed. The practice is not illegal, but is often prohibited by funds.
In its prospectus for the international fund, previously called the International Voyager Fund, Putnam says shares held for less than 90 days would be charged a 1 percent redemption fee. It also warns that it retains the right to limit exchanges in and out of the fund.
Putnam said it was one of the first companies to use a practice called “fair value pricing,” which updates the value of foreign stock in order to prevent market timers from making profits across time zones.
