“Putnam Investments has estimated that shareholder losses from improper fund trading were $7 million to $10 million, according to people familiar with the matter,” writes John Hechinger in today’s Wall Street Journal.

“The big mutual-fund company is conducting a study of the losses to help decide how much to repay shareholders in any settlement of the charges brought against it by regulators in the mutual-fund trading scandal.”

“The internal estimate is at least 10 times the amount that Putnam, a unit of Marsh & McLennan Cos., has previously acknowledged. Last October, the company disclosed that six fund managers engaged in improper short-term ‘market timing’ trades of Putnam funds, skimming $700,000 in profits from other shareholders.”

“But the current estimate, which is subject to change and may or may not be accepted by regulators, is far smaller than damage figures disclosed in the two biggest fund-company settlements so far.”

” ‘The number has not been finalized,’ said a Putnam spokeswoman. ‘We cannot comment or speculate on what it might be at this point. But we continue to work with regulators toward calculating the appropriate number for providing full restitution to shareholders.’ “

“Last October, the Securities and Exchange Commission and the Massachusetts Securities Division charged Putnam with civil fraud relating to fund managers’ trading. Massachusetts regulators also accused Putnam of failing to stop rapid trading among customers in several retirement accounts.”

“In November, Putnam and the SEC reached a partial settlement that required a host of new controls, but the agency has yet to assess a penalty. A spokesman for Massachusetts Secretary of the Commonwealth William Galvin, who oversees the securities division, said there were ‘no talks’ between Putnam and the agency about a settlement. An SEC spokesman declined to comment.”

“In December, Putnam said it had fired the six managers and nine other employees for improper short-term trading in Putnam funds. Putnam’s $7 million to $10 million estimate includes losses resulting from allegedly improper trading by those and any other employees found to have engaged in improper fund exchanges.”

http://online.wsj.com/article/0,,SB107904549852953143,00.html