The Securities and Exchange Commission today announced two settled enforcement actions today with firms over mutual fund sales practices.

The SEC reached a settlement with Putnam Investment Management LLC over allegations that it failed to adequately disclose to its funds’ board of trustees and shareholders the conflicts of interests that arose from its arrangements with broker-dealers for increased visibility within the broker-dealers’ distribution systems. Putnam will pay US$40 million, which will be distributed to the funds.

Putnam agreed to settle the matter, without admitting or denying the commission’s findings. On top of the fine, it has undertaken to direct a senior level employee to implement and maintain policies and procedures with respect to its Preferred Marketing Arrangements, including, among other things, the selection of broker-dealers that also sell fund shares and its disclosures.

The SEC also announced a settlement today with Citigroup Global Markets Inc. Citigroup neither admitted or denied the findings of the settlement.

The SEC found that from at least Jan. 1, 2002, through July 31, 2003, Citigroup failed to disclose adequately certain material facts to its customers in the offer and sale of mutual fund shares. It says it failed to disclose that approximately 75 mutual fund complexes made revenue sharing payments to Citigroup in exchange for access to or “shelf space” within Citigroup’s retail brokerage network. It also failed to disclose breakpoint discounts.

Among other things, the order imposes a US$20 million civil penalty against Citigroup. It also requires Citigroup to retain an independent consultant to conduct a review of Citigroup’s mutual fund sales practices.