Imposing Corporate Governance Reform: The SEC Takes Action

The partial settlement announced on November 13, 2003 between the Securities and Exchange Commission and Putnam Investment Management LLC highlights a significant trend in recent enforcement actions: the imposition of substantial corporate governance reforms and related independent monitoring of these required changes. While criticized by state officials in New York and Massachusetts as not being tough enough, the Putnam settlement details sweeping, and for the most part, voluntary changes to its boardroom in terms of composition, process and procedure. The SEC emphasized these voluntary remedial efforts and undertakings as part of its decision to accept Putnam's offer of settlement. Understanding these specific reforms provides insight into what non-monetary terms the SEC may expect or require in the current regulatory environment.

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