U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 18428 / October 28, 2003
SEC FILES CIVIL INJUNCTIVE ACTION AGAINST TWO FORMER PUTNAM MANAGING DIRECTORS CHARGING SECURITIES FRAUD IN CONNECTION WITH THEIR PERSONAL TRADING IN PUTNAM MUTUAL FUNDS
SEC v. Justin M. Scott and Omid Kamshad, Civil Action No. 03-12082-EFH (D. Mass.)
The Securities and Exchange Commission today filed a civil injunctive action against Justin M. Scott and Omid Kamshad, two former Managing Directors and portfolio managers at Putnam Investment Management LLC (Putnam), charging each of them with securities fraud in connection with their personal trading in Putnam mutual funds. The Commission's complaint, filed in federal district court in Boston, alleges that Scott and Kamshad, for their own personal accounts, engaged in excessive short-term trading of Putnam mutual funds for which they were portfolio managers. According to the complaint, Scott and Kamshad's investment decision-making responsibility for those funds afforded them access to non-public information about the funds, including current portfolio holdings, valuations and transactions. The complaint further alleges that Scott and Kamshad's short-term trading violated their responsibilities to other fund shareholders, that Scott and Kamshad failed to disclose their trading and that, by their trading, they potentially harmed other fund shareholders.
In a related matter, the Commission today issued an administrative order instituting proceedings against Putnam in which the Division of Enforcement (the Division) alleges that Putnam engaged in securities fraud by failing to disclose to the funds or to the fund boards the potentially self-dealing transactions in fund shares by Scott, Kamshad and other employees. The Division further alleges that Putnam failed to supervise Scott, Kamshad and other employees, that it failed to have policies and procedures reasonably designed to prevent the misuse of non-public information and that it failed adequately to enforce its code of ethics.
The specific charges against Scott and Kamshad in the federal court action are that they violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (Advisers Act). The Commission is seeking injunctive relief, disgorgement, penalties, and such equitable relief as the court deems appropriate.
The Commission acknowledges the assistance of the Secretary of the Commonwealth of Massachusetts in its investigation. Today's actions reflect the joint efforts of the Securities and Exchange Commission and the Secretary of the Commonwealth of Massachusetts, which today brought related actions against Putnam, Scott and Kamshad.
The Commission's investigation is continuing.