The Nevada Public Employees Retirement System has suspended the authority of Putnam Investments, facing allegations of mutual fund trading irregularities, to make any more investments in its $424 million portfolio with the system.
"As soon as the allegations became public, we halted their trading authority in the portfolio," said Laura Wallace, deputy director in charge of investments for the retirement system.
Wallace also said she'll recommend termination of the Putnam contract when the system's directors meet Nov. 12. She added the allegations haven't affected the value of the fund.
Civil fraud charges have been filed against Boston-based Putnam, the nation's fifth-largest mutual fund company. Lawrence Lasser recently stepped down from his post as the company's chief executive, although Putnam has said it doesn't believe it acted fraudulently.
The Putnam case is part of a sweeping probe of the mutual fund industry by the federal Securities and Exchange Commission.
Putnam was accused in civil actions by state and federal regulators of turning a blind eye to the actions of six employees who allegedly engaged in so-called market timing practices from January 2000 through last month.
Market timing - trading in and out of funds to take advantage of price lags - is not illegal. But regulators allege Putnam defrauded customers by allowing members of a New York union retirement plan to engage in the practice in the face of a company policy forbidding it.
In related action, state Treasurer Brian Krolicki said Wednesday he "is comfortable all our funds are secure" in part of the College Saving Plan handled by Strong Financial Corp., another firm facing charges.
Nevada has $400 million in all of its college savings funds, but only $6 million is handled by Strong Financial.
"We need to approach this with caution," Krolicki said, adding that the College Savings Board meets Friday and will discuss the issue and look at other options. He said Strong Financial is audited regularly by a certified public accounting firm hired by his office.