The firm is forcing out the executives for profiting on improper, short-term trades.

Putnam Investments said Friday that it would oust four of its mutual fund managers for making improper, short-term trades of their own funds, as the scandal rocking the $6.9-trillion fund business took a new turn.

Two other managers who made rapid trades of other funds at the Boston-based firm, a unit of Marsh & McLennan Cos. were not being replaced, contrary to published reports, said spokeswoman Nancy Fisher. Their conduct was deemed less egregious than that of their colleagues.

Though the trading took place in early 2000, the revelation that several managers had personally profited at the expense of long-term shareholders appalled industry critics who have followed the scandal since New York Atty. Gen. Eliot Spitzer announced an investigation of fund trading practices Sept. 3.

Just when you thought it couldn’t go any lower, it has, said Mercer Bullard, founder of Fund Democracy, a mutual fund shareholder advocacy firm in Oxford, Miss. You’re handing your money to a fiduciary to manage, and he turns around and steals it for himself.

Fisher said the traders, who reportedly reaped hundreds of thousands of dollars in profits, had been detected through the firm’s compliance operation and that their activity had been halted more than three years ago.

The system identified them, they were warned and the activity ceased, Fisher said.

She declined to name the individuals. The funds in which the trading occurred were among the eight Putnam international stock funds, but the firm refused to identify them.

Industry representatives had hoped the abuses alleged by Spitzer were not widespread. But a number of fund companies and brokerages have since been implicated. With an estimated $272 billion in assets, Putnam is the nation’s fifth-biggest fund company.

Putnam already was facing trouble in its home state, where Massachusetts Secretary of the Commonwealth William F. Galvin expects to file civil securities fraud charges Tuesday against the firm, alleging that it allowed certain 401(k) investors to time its funds. That would make Putnam the first mutual fund company to be charged with wrongdoing in the investigation.

The fund scandal centers on two practices: rapid market timing trades that are not necessarily illegal but can hurt long-term investors by driving up transaction costs, and illegal late trading, in which after-the-bell trades are posted at that day’s price at 4 p.m. Eastern time to exploit late news, rather than at the next day’s closing price as required. Combined, the practices cost investors as much as $5 billion a year, according to academic studies.

Market-timing trades often involve funds that invest overseas as investors try to take advantage of pricing discrepancies between U.S. and other markets.

In his original complaint, Spitzer said Bank of America Corp. Bank One Corp. Janus Capital Group Inc. and Strong Capital Management allowed the hedge fund Canary Capital Partners to make rapid or late trades. None of the mutual fund companies has been charged by Spitzer. Canary settled charges against it for $40 million.

Spitzer later charged a Bank of America broker with fraud and larceny for helping Canary, and obtained guilty pleas on other charges from a former vice chairman at Fred Alger Management Inc. and a former trader at the hedge fund Millennium Partners.

Several brokerages and fund firms have fired or disciplined employees as a result of their own investigations, including Alliance Capital Management, which suspended a technology mutual fund manager and a hedge fund executive for undisclosed conflicts of interest.

The Securities and Exchange Commission’s enforcement chief, Stephen Cutler, said in a TV interview this week that the commission could bring charges against fund company executives and portfolio managers who have timed their own funds. He did not say which firms or executives could be targeted.

Russ Kinnel, Morningstar Inc.’s director of fund analysis, said Friday that the Putnam revelations opened a new front in the trading scandal.

Now every fund company in America is looking at the short-term trading their managers may have done, Kinnel said.

Securities lawyer Michael Donahue of L.A.-based Holland & Knight said fund managers making market timing trades were in a position to exploit their firsthand knowledge of the current portfolio holdings.

That just looks terribly ugly — the idea that they could have been using their inside position and knowledge, Donahue said.

According to a Wall Street Journal report, the six Putnam managers netted a total profit of $700,000. The firm would not confirm the figure.

Kinnel gave the firm credit for stopping the abuses and promising restitution to the funds involved, but he said Putnam should have taken a tougher stance much sooner.

The good news is that the technical side of their compliance system worked, he said. The bad news is that Putnam didn’t make restitution or fire the managers at the time.

Friday on the New York Stock Exchange, Marsh & McLennan shares slid $1.19 to $45.06.