The U.S. Securities and Exchange Commission reported that it has settled with a former head of Putnam LLC over alleged trading commission allocation conflicts.

The SEC issued an order against Lawrence Lasser, former CEO of Putnam and president of the investment advisor to the Putnam Funds, Putnam Investment Management LLC over allegations that he did not ensure that Putnam fulfilled its fiduciary duty to disclose adequately to the Putnam Funds’ Board of Trustees the use of fund brokerage commissions to pay for “shelf space” arrangements or potential conflicts of interest created by this use. Lasser consented to the issuance of the order without admitting or denying any of its findings.

The order finds that from at least Jan. 1, 2000 through Nov. 1, 2003, Putnam directed brokerage commissions on its portfolio transactions to broker-dealers for “shelf space”, or heightened visibility within their distribution systems. Its distributor had entered into arrangements with over 80 broker-dealers to provide services designed to promote the sale of the Putnam Funds. Approximately 20 of those broker-dealers were paid in cash while over 60 of them received brokerage commissions from the Putnam Funds’ portfolio transactions.

The SEC said that when Putnam directed brokerage commissions to broker-dealers in connection with these arrangements, its affiliate, PRM, did not use its own assets to pay for these obligations. The entire Putnam organization benefited from the use of fund assets to defray such expenses, however, the SEC said that Putnam did not adequately disclose this conflict of interest to the Putnam Board. It also did not adequately disclose to the Putnam Board the potential conflict of interest presented for its Equity Trading group, which was faced with directing trades to the broker-dealers designated by PRM for these arrangements, while at the same time satisfying its best execution obligations, the commission added.

The order also finds that Lasser knew that Putnam used fund brokerage commissions to satisfy these arrangements and was aware of potential conflicts of interest created by this use. It requires Lasser to cease-and-desist from committing or causing any violations and requires him to pay US$75,000 in civil penalties.

Power Financial Corp. is said to be in talks to possibly acquire Putnam from its parent Marsh & McLennan Companies, Inc.