NEW YORK (CNN/Money) - Lawrence Lasser is out as CEO of Putnam Investments, the firm's parent company announced Monday, making him the highest-profile executive to lose his job in connection with federal and state probes into questionable trading practices in the mutual fund industry.

Lawrence Lasser, above, was removed as CEO of Putnam Investments.

Marsh & McLennan Cos., which owns Putnam, named Charles Haldeman, who had been senior managing director and co-head of investments at Putnam, as the new president and CEO to succeed Lasser, one of the most highly paid executives in the business.

The parent company also imposed a new layer of oversight on the embattled mutual fund firm.

It named A.J.C. Smith, former chairman and chief executive officer of Marsh & McLennan, to the new post of chairman of Putnam, while Steven Spiegel, senior managing director at Putnam, was named vice chairman, also a new post.

It also announced that Barry Barbash, a partner in Shearman & Sterling LLP and former director of the Securities and Exchange Commission's division of investment management, has been hired to conduct an independent review of Putnam's policies and controls, and report directly to Marsh & McLennan's CEO Jeffrey Greenberg. The moves are effective immediately.

Lasser, 61, has been with Putnam since 1969 and has been CEO of the mutual fund operations since 1986, helping to build it into one of the nation's largest mutual fund firms. But in the wake of the investigation into trading practices at Putnam and other mutual fund firms, a number of states pulled billions in investments from Putnam last week alone.

Securities expert Tom Ajamie and Iowa State Treasurer Michael Fitzgerald comment on the mutual fund industry. Play video (Real or Windows Media)

The move comes a week after the Securities and Exchange Commission and Massachusetts regulators filed civil actions against Putnam and two former managers, making the No. 5 mutual fund firm the first to be formally charged in a widening probe into improper trading.

Putnam said at that time that its control systems designed to curb trading abuses were not foolproof, and promised to restore any losses caused by the improper trades.

Putnam is charged with allowing some fund managers and certain clients to break company rules that prohibit so-called market timing, in which some investors buy and sell shares rapidly to benefit from stale prices. While the practice is not illegal, it hurts other investors by driving up trading costs and diluting returns.

As of Friday, six states -- Massachusetts, New York, Vermont, Pennsylvania, Rhode Island, and Iowa -- pulled about $4.4 billion from Putnam since the charges were handed down, and the Boston Globe reported Monday another 10 other states are considering such a move.

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The Florida State Board of Administration, which has $1.2 billion invested with Putnam, put the firm on a watch list late last week.

And large state funds might not be the only ones pulling money out of Putnam. Individual investors could also be spooked by the scandal into pulling funds.

Mutual Fund rating service Morningstar advised individual investors not to put new money into Putnam funds at least until all the dust settles, although Lasser's departure stopped the service from advising investors to at least think about pulling their money out.

It gave new CEO Haldeman high marks, though.

"We had planned to issue a 'consider sell' recommendation on Putnam had Lasser remained at the firm," said Morningstar's Russel Kinnel on the service's Web site Monday. "What happened at Putnam was absolutely appalling, and it happened under Lasser's watch."

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Kinnell gave new Putnam CEO Haldeman high marks, but he said the outlook for the funds in the near term was not encouraging.

"Putnam is in the early stages of a restructuring effort aimed at providing better, more reliable performance," Kinnel wrote. "It may be years before Putnam funds have a lot of appeal. Stock-picking skill and experience aren't changed overnight. Even if Haldeman and (head of research Josh) Brooks succeed, it will be years before their changes can markedly improve investment results."

Lasser was one of the top paid executives in the sector. He received $1 million in base pay and a $7 million bonus in 2002, according to Marsh's filings with the SEC. The filing also says he is due to continue to receive his pay and bonuses for the life of his employment contract, although a Marsh & McLennan spokesman told Reuters that the company is reviewing terms of that contract to see what he is due.

The New York Times reported Sunday that his total compensation over the last five years came to $163 million. In addition, the SEC filing says he is due a special retirement benefit valued earlier this year at $15 million.

Pressure was building on Lasser at the end of last week, especially as states pulled pension money out of the funds and Marsh's share price fell. Its shares closed Friday at $42.75, down $1.75 on the day, and off about 10 percent from Tuesday's close. Marsh & McLennan (MMC: up $1.93 to $44.68, Research, Estimates) shares were up about 4 percent in mid-morning trading Monday following the announcement.

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"I think Lasser has to go," Roy Weitz, who runs the industry watchdog FundAlarm.com Web site, told Reuters late last week. "For being known as a detail-oriented control freak, it is inconceivable that he didn't know about this. What is even more shocking is that he didn't do anything about it."

But it wasn't only the investigation and scandal that posed problems for Lasser. While Putnam had grown to the No. 5 mutual fund company under his watch, its performance had also lagged other firms in recent years. He had been sharply criticized for his funds' subpar performance during the bear market when he still took home multimillion-dollar bonuses.

"We are very angry about the whole situation and heads have to start rolling at Putnam," one Marsh & McLennan investor, who asked not to be named, told Reuters last week. "There are a lot of other companies that are better managed and that don't have these problems."  

Reuters contributed to this report