A LETTER TO WILLIAM DONALDSON ON THE PUTNAM SETTLEMENT

November 20, 2003

William H. Donaldson
Chairman Securities and Exchange Commission
450 Fifth Street, NW Washington, DC 20549

Dear Chairman Donaldson:

As you noted in your recent Wall Street Journal op-ed ("Investors First," November 18, 2003), your agency's recent settlement with Putnam investments has "provoked considerable discussion, and some criticism."

Obviously, you are confident that the SEC's decision to let Putnam Investments off the hook without just punishment or even significant concessions was the right decision for investors.

But many others, including us, disagree with your assessment and believe that you could have and should have exacted a stiffer price for the wrongdoing and sent a clearer message that playing around with investors' money and violating investors' trust is not just a gamble but a serious offense that can only be deterred with serious punishment.

Therefore, we believe that it is crucial to understand how your agency decided on this particular settlement. Regardless of questions about its merit (of which there are many), we believe the investing public deserves to know more about the decision-making process that led to the settlement. To help the public understand this process better, we would like to pose a few pertinent questions:

1) What exactly are the SEC's enforcement policies? More specifically, what criteria does the SEC use to determine when to refer cases to the Justice Department or when to settle? Are there certain criteria that the Putnam case failed to meet that caused your agency to jump to such a quick and easy settlement?

2) How many top Putnam employees are former SEC employees? Did any former SEC employees at Putnam contact the SEC asking the agency to go easy on the firm? If so, what rules are in place at the SEC to make sure that such influence-peddling is not allowed to corrupt the mission of the agency? Are there any efforts being made to strengthen ex parte rules to prevent former SEC employees now working for firms from being able to plead their firms' case before the SEC for a set period of time?

3) Now that the Putnam case is closed, how much of the Putnam file will you open to the public? Will you reveal, for example, the decision-making process within the SEC that led to such a quick settlement? Will you reveal the content of any communications between the SEC and Putnam, or between the SEC and anybody operating on Putnam's behalf?

We believe that these are crucial questions that can help the investing public to better understand whether the SEC is really doing its best to serve and advocate for the investing public or whether certain changes need to be made. We would appreciate a prompt response.

Sincerely,

Ralph Nader
Founder, Citizen Works

Lee Drutman
Communications Director, Citizen Works