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Other shareholders would see the net asset value of their shares rise 1.98percentt, rather than the 2percentthatatheyey would have risen without the insider's market timing trade.
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Market timing trades can hurt long-term fund investors.
That helped the brokerage firm's customers to hedge their market timing trades, the complaint said.
But he wanted more, and pushed to let the hedge fund do market timing trades.
Late last month, the brokerage division dismissed a dozen brokers and managers who it believed arranged for market timing trades, an executive said.
Allowing big investors to conduct market timing trades seemed to be one solution because in exchange for the privilege of conducting such trades, hedge funds would agree to invest additional money in the mutual fund.
Market timing trades seek to profit from the fact that mutual funds are valued once a day at 4 p.m. Eastern time, while the securities they own are traded more frequently around the world.
Richard S. Strong, who runs the Strong Group of funds, has not disputed claims by Mr. Spitzer that he made as much as $600,000 from market timing trades in his funds.
We now learn that a hedge fund in which he was an investor was making money from market timing trades in PBHG funds -- including, according to one person briefed on the findings, the Growth Fund run by Mr. Pilgrim.
That legal theory would encompass cases where market timers promise to invest money in other funds run by the manager -- thus providing it with management fees -- in return for being allowed to make market timing trades.
One question that the Putnam spokeswoman said she could not answer was whether the fund's board had been advised of the market timing trades when Putnam officials learned of them in 2000.
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