The $40 million penalty was imposed on Putnam Investments, a subsidiary of New York-based MMC after the U.S. Securities and Exchange Commission accused, the concern of using fund assets to pay dozens of broker-dealers for "prime shelf space" from 2000 to 2003 without disclosing that use of fund assets to shareholders.

The SEC accused Citigroup Global Markets Inc., a subsidiary of Citigroup, New York, of giving certain mutual fund companies prime shelf space in exchange for payments from the fund companies that were not fully disclosed to customers.

Putnam agreed to pay the $40 million in fines to settle the SEC charges lodged against it. Neither Putnam nor Citigroup admitted or denied the SEC findings.

Regulators at the SEC and state agencies began investigating allegations of problems with the management of Putnam funds in 2003.

Putnam already has agreed to pay $50 million in SEC fines in connection with charges that loose supervision let speculators use Putnam funds to "time the market," or profit from delays in the spread of stock price information by rushing money in and out of funds.

The investigations of Putnam and separate investigations by New York State into alleged MMC insurance brokerage price fixing in exchange for insurance company kickbacks led to the departure of the company's former chairman and chief executive officer, Jeffrey Greenberg, in October 2004.

The new settlement concludes the investigation into the shelf space issue for Putnam, company spokeswoman Nancy Fisher said.

Fisher said Putnam cooperated with the SEC and has made extensive changes in its fund management practices since 2003.

"Putnam remains committed to doing is right for its clients," Ms. Fisher said.