SEC chief William Donaldson has taken his case to the readers of the Wall Street Journal. The chairman of the Securities and Exchange Commission penned an opinion piece published Tuesday morning by the Wall Street paper of record. In it, Donaldson defends the SEC's settlement with Putnam Investments over allegations that the fund firm allowed fund managers to quick trade funds they managed.

That settlement has come under attack from state regulators, including both New York State Attorney General Eliot Spitzer and Massachusetts Secretary of the Commonwealth William Galvin. Both state officials have said they believe the settlement did not protect fund shareholders.

Donaldson rebutted Galvin and Spitzer, claiming that the criticism is "misguided and misinformed." He believes that the settlement does protect Putnam's current shareholders and that it is an "important first step" in obtaining meaningful sanctions against Putnam.

One of the most significant complaints with the SEC settlement is that it does not force Putnam to admit wrongdoing. Critics believe that such an admission is more than symbolic given that the core charges against the fund industry are that officials deceived shareholders. A settlement without an admission of guilt allows the deception to continue.

Donaldson dismisses that critique, noting that the SEC required Putnam to admit to liability for the purposes of determining the amount of any penalty to be imposed. He also hides behind the precedent of others by pointing out that other federal and state agencies also "regularly forgo" blanket admissions of guilt in order to resolve civil complaints.

"We made a decision, however, that it would be better to move quickly to obtain real and practical protections for Putnam's investors, right now, rather than to pursue a blanket legal admission from Putnam," he writes.  

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