Key facts
- Western Asset Management Co. will pay a $100 million SEC civil penalty.
- The settlement resolves charges of alleged cherry-picking by former co-chief investment officer Kenneth Leech.
- Leech allegedly steered well-performing trades to favored portfolios and worse-performing trades to others.
- Wamco did not admit wrongdoing as part of the settlement.
- Franklin Resources is closing its Macro Opportunities strategy.
- Ken Leech faces criminal charges, with his trial scheduled to begin June 15.
Western Asset Management Co (Wamco), a unit of Franklin Resources, will pay a $100 million civil penalty to the U.S. Securities and Exchange Commission (SEC) to resolve charges related to former co-chief investment officer Kenneth Leech's alleged $600 million cherry-picking scheme. The SEC stated that Leech steered well-performing U.S. Treasury derivative trades to favored portfolios following a 'Macro Opportunities' strategy, while allocating worse-performing trades to 'Core' and 'Core Plus' strategies. Wamco, which did not admit wrongdoing, settled as a business decision to avoid prolonged litigation. The settlement ends probes by the SEC and the Department of Justice. Leech, who has pleaded not guilty to related criminal charges scheduled to begin June 15, allegedly conducted the scheme from January 2021 to October 2023. Franklin Resources is closing its Macro Opportunities strategy, and Leech is on a leave of absence. Wamco's assets under management have decreased significantly since probes into Leech's trading were disclosed.