The charges were brought by the US Securities and Exchange Commission (SEC) and Massachusetts securities regulators.

The SEC has also brought charges against two former Putnam managers.

In a statement, Putnam said it believed it had not acted fraudulently, and that it was working with regulators to "resolve these issues in an appropriate and expeditious manner".

The charges relate to a practice called market timing, which involves profiting from short term trading in mutual fund shares, and can damage the value of the fund for long term investors.

Charges

The SEC charged former Putnam fund managers Justin Scott and Omid Kamshad with securities fraud.

We believe that, contrary to the allegations in the complaints, Putnam did not act fraudulently Putnam statement

"The complaint alleges that Scott and Kamshad, for their own personal accounts, engaged in excessive short-term trading of Putnam mutual funds for which they were portfolio managers," the SEC said.

The SEC has also brought an administrative order against Putnam.

It said its order "alleges that Putnam engaged in securities fraud by failing to disclose to the funds or to the fund boards the potentially self-dealing transactions in fund shares by Scott, Kamshad and other employees."

The Massachusetts complaint said: "Despite prospectus disclosures that indicated market timing would not be tolerated, from at least January 2000 to September 2003 plan participants were permitted to market-time Putnam International and other mutual funds."

Vigilance

Stephen Cutler, director of the SEC Division of Enforcement, said: "Self dealing is antithetical to the responsibilities investment advisers and their employees owe to mutual fund investors.

"We will continue to be... vigilant in pursuing enforcement actions against securities professionals who put their own interests ahead of the interests of investors they work for."

Last week, Putnam announced it had dismissed four fund managers for improper trading.

In a statement released on Tuesday, Putnam said it regretted that the regulators had felt compelled to press charges.

"Our internal surveillance systems and controls successfully identified most of the market timing activities," said Putnam, which is owned by insurer Marsh & McLennan.

"Our systems were not 100% effective and we deeply regret that any incidence of market timing took place.

"However, we believe that, contrary to the allegations in the complaints, Putnam did not act fraudulently.

"We want to state explicitly that Putnam did not receive any financial benefit.

"In addition, Putnam did not engage in any financial arrangement to allow market timing with any client or participant."

Restoring losses

The firm noted that the individuals named in the SEC and Massachusetts complaints were no longer managing money.

"While we believe we have identified all investment professionals who traded in their own funds, we continue to review all trading activity to determine if there was additional market timing activity," the firm said.

"Putnam will restore any losses deemed to be the result of employee trading activity."