Reverse Spin – State probers: SEC too soft on Putnam

Ain’t nothing “settled” with regard to this settlement.

New York Attorney General Eliot L. Spitzer and Massachusetts Secretary of State William Galvin dismissed Putnam Investments LLC’s partial settlement with the Securities and Exchange Commission as too lenient.

“This is the same old ineffective enforcement we’ve seen time and time again,” Mr. Galvin reportedly said.

“The SEC is more interested in protecting the securities industry than exposing it,” he added. “It’s very hard for me to believe they have thoroughly investigated the facts in little over a week.”

Mr. Spitzer, meanwhile, said the settlement, which was unveiled on Thursday, shouldn’t be viewed as a model for a settlement with his office.

Boston-based Putnam, the fifth-largest U.S. mutual fund company, agreed to pay back investors who were hurt by the short-term trading. The company, a unit of New York’s Marsh & McLennan Cos. Inc., neither admitted nor denied wrongdoing.

Crocodile tears?

* No joy in picking up assets flowing out of scandal-tainted fund companies? Oh, puh-leeze!

Speaking to business leaders in Boston, John J. Brennan, chief executive of The Vanguard Group Inc., said the Malvern, Pa.-based firm is probably benefiting “at the margins” from outflows at other companies as customers look for new places to invest.

“We don’t take any joy in it,” Mr. Brennan reportedly said. “We want the headlines to go away, because nobody wants to be seen as a good house on a bad block.”

During the speech Thursday, he backed a proposed mandatory 2% redemption fee on trades conducted within five days, as well as a 4 p.m. cutoff for funds to receive purchase orders for customers to receive that day’s fund price.

Despite the scandal, Mr. Brennan insisted overall governance of mutual funds is strong.

No nunsense

* Those nuns have come a long way since the days of using rulers to extract information from people.

On Tuesday, shareholders of San Jose, Calif.-based Cisco Systems Inc. overwhelmingly rejected a proposal by a group of religious investors that would have required the company to disclose the disparity between its highest- and lowest-paid employees.

While the measure received just 9% of the vote, it underscored the growing frustration with what many view as excessive pay among corporate bigwigs.

“For many years, religious investors have been concerned that CEOs receive exorbitant pay and bonuses while jobs are being cut,” said Sister Grace Diaz of the Sisters of the Holy Names of Jesus and Mary, in a speech before shareholders. “These corporate practices have resulted in the unchecked and growing concentration of wealth and privilege.”

Autumn regrets

* Looks like Americans are continuing to tighten their belts.

Retail sales fell by 0.3% in October, following a 0.4% drop in September, the Department of Commerce reported on Friday. The consecutive drops came after consumers went on a shopping spree during the summer months.

“Retail sales fell in October, so should we be worried that the recovery is in trouble? Hardly,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pa., reportedly said. “Consumers are still spending money; it’s just that they are not trying to buy every vehicle on the lot.”

Closing Quote

“It’s been like undergraduate marketing students flunking Marketing 101 in a third-rate college.”

Mark Stevens, president of marketing firm MSCO Inc. and author of “Your Marketing Sucks,” on the fund industry’s response to the scandals. Page 3