Updated from 5:07 p.m. EST

The bad news keeps coming for

Putnam Investments

, the mutual fund firm that regulators have charged with securities fraud.

On a day Putnam appeared to be making progress with its many legal entanglements by announcing a tentative settlement with the

Securities and Exchange Commission

, word emerges that regulators may be planning new charges against its high-ranking executives.

A source close to Massachusetts securities regulators said the commonwealth is looking into allegations Putnam General Counsel William Woolverton may have engaged in potentially inappropriate "active short-term trading" in some of the firm's international funds.

Last month, Massachusetts Secretary of the Commonwealth William Galvin and the SEC, in separate civil suits, charged the Boston-based fund family of securities fraud by failing to disclose that two of its managers engaged in excessive short-term trading of Putnam mutual funds for their own benefit.

It appears Massachusetts is trying to determine whether Woolverton, who could not be reached for a comment, may have engaged in similar activity.

Separately, Galvin, in an interview with


, blasted the partial settlement Putnam reached with the SEC. Galvin said he was "outraged" with the settlement with Putnam, a division of

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, and did not think it would help reform the mutual fund industry.

As for the deal with the SEC, Putnam agreed to a system of calculating how much it owes its shareholders. But the two sides did not agree on the amount of a fine or other monetary relief Putnam will pay.

Putnam agreed to the entry of an administrative order under which it will make "significant and far-reaching corporate governance" changes in the wake of the scandal, according to the SEC. Among other things, the firm must bring in an independent outfit every two years to conduct a review of the firm's supervisory and compliance operations.

New York Attorney General Eliot Spitzer's office, which began the investigation into the mutual fund industry and also has issued subpoenas to Putnam, issued a statement saying the SEC deal "provided some preliminary measures" to address fund-trading abuses. But Spitzer said it doesn't address "fundamental issues pertaining to the structural reform necessary to ensure that investors are charged the lowest possible fees."

"The SEC's document should not be viewed as a template for settlement with our office," Spitzer said. "Our investigation of Putnam is continuing."

The SEC found Putnam committed securities fraud by "failing to disclose potentially self-dealing securities trading by several of its employees." It also failed to take adequate steps to detect and deter such trading through its own internal controls and supervision.

Putnam consented to the entry of the order without admitting or denying its findings, but has agreed not to contest the findings in connection with the later determination of a penalty and other monetary relief.

The settlement comes at a time that big institutional investors have been fleeing Putnam funds. More than $14 billion has been withdrawn since the scandal broke.

Earlier this month, the scandal cost Lawrence Lasser his job at the top of Putnam's chain of command. Lasser, who collected one of the biggest paychecks in the mutual fund business, resigned as the firm was forced to make a long overdue apology to its customers.

But that apology and a major ad campaign hasn't stopped the wave of defections from Putnam. Many won't be satisfied until the fund firm is forced to cough up a lot of money in restitution and penalties.

"The SEC needs to create a substantial restitution fund to compensate the victims of mutual fund fraud," said Jacob Zamansky, an attorney who represents investors. "These settlements have typically done nothing to compensate investors."