Putnam Investments Inc. and The Putnam Advisory Company, LLC - ss. 78(1), 80 of the CFA

Headnote

Subsection 78(1) of the Commodity Futures Act (Ontario) -- Revocation of the previous order granting relief from the adviser registration requirements of subsection 22(1)(b) of the CFA to sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options.

Section 80 of the Commodity Futures Act (Ontario) -- Relief from the adviser registration requirements of subsection 22(1)(b) of the CFA granted to sub-adviser not ordinarily resident in Ontario in respect of advice regarding trades in commodity futures contracts and commodity futures options, subject to certain terms and conditions. Relief mirrors exemption available in section 7.3 of OSC Rule 35-502 -- Non-Resident Advisers made under the Securities Act (Ontario).

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22(1)(b), 78, 80.

Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.

IN THE MATTER OF

THE COMMODITY FUTURES ACT

R.S.O. 1990, CHAPTER C.20, AS AMENDED

(the CFA)

AND

IN THE MATTER OF

PUTNAM INVESTMENTS INC.

AND

THE PUTNAM ADVISORY COMPANY, LLC

ORDER

(Section 80 and Subsection 78(1) of the CFA)

UPON the application (the Application) of Putnam Investments Inc. (PII) and The Putnam Advisory Company, LLC (the Sub-Adviser) to the Ontario Securities Commission (the Commission) for an order:

(a) pursuant to subsection 78(1) of the CFA, revoking the exemption order granted by the Commission to the Sub-Adviser on July 12, 2005 (the Previous Order, as described below); and

(b) pursuant to section 80 of the CFA, that the Sub-Adviser (including its directors, officers and employees) be exempt, for a period of five years, from the requirements of paragraph 22(1)(b) of the CFA in respect of acting as an adviser to certain mutual funds (the Funds, as defined below) in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges outside of Canada and cleared through clearing corporations outside of Canada;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Sub-Adviser having represented to the Commission that:

1. The Sub-Adviser is a limited liability company organized under the laws of the State of Delaware, with its principal place of business located in Boston, Massachusetts in the United States. The Sub-Adviser is registered with the U.S. Securities and Exchange Commission (the SEC) as an investment adviser. Although the Sub-Adviser advises on derivative products to clients in the U.S., the Sub-Adviser is expressly exempt from registration under the U.S. Commodity Exchange Act as a commodity trading adviser with the U.S. Commodity Futures Trading Commission (the CFTC).

2. PII is a corporation incorporated under the Business Corporations Act (Ontario), and is registered:

(a) under the Securities Act (Ontario) (the OSA) as an adviser in the categories of investment counsel and portfolio manager and as a dealer in the category of limited market dealer; and

(b) under the CFA as an adviser in the categories of commodity trading counsel and commodity trading manager.

3. The Sub-Adviser is an affiliate of PII.

4. PII acts as trustee, manager and portfolio adviser of Putnam Canadian Balanced Fund, Putnam Canadian Bond Fund, Putnam Canadian Equity Fund, Putnam Canadian Money Market Fund, Putnam Global Equity Fund, Putnam U.S. Value Fund, Putnam U.S. Voyager Fund, Putnam International Equity Fund, and Putnam Canadian Equity Growth Fund (collectively, the Putnam Retail Funds) and Putnam U.S. Equity Fund, Putnam Non-North American Equity Fund, Putnam U.S. Midcap Equity Fund, Putnam Emerging Markets Fund, Putnam Global Core Equity Fund, Putnam U.S. Midcap Equity Fund, Putnam International Bond Fund, and Putnam Long Government Bond Plus MAPs Fund (collectively, the Putnam Pooled Funds). The Sub-Adviser currently acts as sub-adviser to PII in respect of a number of the Funds. PII may in the future establish or advise certain other mutual funds for which it engages the Sub-Adviser to provide advisory services (collectively, together with the Putnam Retail Funds and the Putnam Pooled Funds, the Funds).

5. The Funds may, as a part of their investment program, invest in commodity futures contracts and commodity futures options traded on commodity futures exchanges outside of Canada and cleared through clearing corporations outside of Canada.

6. The Sub-Adviser has entered into an investment sub-advisory agreement (the Sub-Advisory Agreement) and may enter into additional Sub-Advisory Agreements, with PII, whereby PII provides investment advice and portfolio management services to the relevant Fund in respect of purchases and sales of commodity futures contracts and commodity futures options, and the Sub-Adviser acts as sub-adviser to PII (the Proposed Advisory Services).

7. Paragraph 22(1)(b) of the CFA prohibits a person or company from acting as an adviser unless the person or company is registered as an adviser under the CFA, or is registered as a partner or an officer of a registered adviser and is acting on behalf of a registered adviser. Under the CFA, "adviser" means a person or company engaging in or holding himself, herself or itself out as engaging in the business of advising others as to trading in "contracts", and "contracts" means commodity futures contracts and commodity futures options.

8. By providing the Proposed Advisory Services, the Sub-Adviser will be acting as an adviser with respect to commodity futures contracts and commodity futures options and, in the absence of being granted the requested relief, would be required to register as an adviser under the CFA.

9. There is presently no rule under the CFA that provides an exemption from the adviser registration requirement in paragraph 22(1)(b) of the CFA for a person or company acting as an adviser in respect of commodity futures contracts and commodity futures options that is similar to the exemption from the adviser registration requirement in section 25(1)(c) of the OSA for acting as an adviser (as defined in the OSA) in respect of securities that is provided under section 7.3 of OSC Rule 35-502 -- Non Resident Advisers (Rule 35-502).

10. As would be required under section 7.3 of Rule 35-502:

(a) the obligations and duties of the Sub-Adviser will be set out in a written agreement with PII;

(b) PII will contractually agree with the Funds to be responsible for any loss that arises out of the failure of the Sub-Adviser:

(i) to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of PII and the Funds; or

(ii) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances (together with (i), the Assumed Obligations); and

(c) PII cannot be relieved by the Funds from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations.

11. The Sub-Adviser is not a resident of any province or territory of Canada.

12. The Sub-Adviser is, or will be, appropriately registered or licensed or is, or will be, entitled to rely on appropriate exemptions from such registrations or licences to provide advice to the Funds pursuant to the applicable legislation of its principal jurisdiction. In particular, the Sub-Adviser is registered as an investment adviser with the SEC and is exempt from registration with the CFTC.

13. Prior to purchasing any securities in one or more of the Funds, all investors in the Funds who are Ontario residents will receive written disclosure that includes:

(a) a statement that PII is responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(b) a statement that there may be difficulty in enforcing any legal rights against the relevant Fund or the Sub-Adviser (or the individual representatives of the Sub-Adviser) advising the relevant Fund, because such entity is resident outside of Canada and all or substantially all of its assets are situated outside of Canada; and

(c) a statement that the Sub-Adviser advising the relevant Fund is not, or will not be, registered with the Commission under the CFA and, accordingly, the protections available to clients of a registered adviser under the CFA will not be available to purchasers of units of the relevant Fund.

14. On July 12, 2005, the Commission granted the Sub-Adviser an exemption from the requirements of paragraph 22(1)(b) of the CFA in respect of the Proposed Advisory Services (the Previous Order). However, the definition of "Funds" in the Previous Order was more limited than that provided in this Order.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemption requested on the basis of the terms and conditions proposed;

IT IS ORDERED pursuant to section 80 of the CFA that the Commission revokes the Previous Order; and

AND IT IS FURTHER ORDERED pursuant to section 80 of the CFA that the Sub-Adviser is exempted from the requirements of paragraph 22(1)(b) of the CFA in respect of the Proposed Advisory Services provided to PII, for a period of five years, provided that at the relevant time that such activities are engaged in:

(a) PII is registered under the CFA as an adviser in the categories of commodity trading counsel and commodity trading manager;

(b) the Sub-Adviser is appropriately registered or licensed or is entitled to rely on appropriate exemptions from such registrations or licences to provide advice to the Funds pursuant to the applicable legislation of its principal jurisdiction;

(c) the obligations and duties of the Sub-Adviser are set out in a written agreement with PII;

(d) PII has contractually agreed with the Fund to be responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(e) PII cannot be relieved by the Funds from its responsibility for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(f) prior to purchasing any securities in one or more of the Funds, all investors in the Funds who are Ontario residents received written disclosure that includes:

(i) a statement that PII is responsible for any loss that arises out of the failure of the Sub-Adviser to meet the Assumed Obligations;

(ii) a statement that there may be difficulty in enforcing any legal rights against the relevant Fund or the Sub-Adviser (or the individual representatives of the Sub-Adviser) advising the relevant Fund, because such entity is resident outside of Canada and all or substantially all of its assets are situated outside of Canada; and

(iii) a statement that the Sub-Adviser advising the relevant Fund is not, or will not be, registered with the Commission under the CFA and, accordingly, the protections available to clients of a registered adviser under the CFA will not be available to purchasers of units of the relevant Fund.

April 13, 2007