Key facts
- Kenneth Leech will pay a $3 million fine to settle a civil case with the SEC.
- Leech pleaded guilty to one obstruction charge in June.
- The alleged "cherry-picking" scheme involved over $600 million from January 2021 to October 2023.
- Leech's former employer, Western Asset Management Co (Wamco), agreed to pay $100 million in June to resolve related SEC civil charges.
- The settlement, if approved by the court, would return $103 million to harmed investors.
- Leech allegedly steered better trades to "Macro Opportunities" portfolios and worse trades to "Core" and "Core Plus" portfolios.
Kenneth Leech, a former star bond manager, has agreed to pay a $3 million fine to settle a civil case with the U.S. Securities and Exchange Commission (SEC) over alleged "cherry-picking" practices. Leech had previously pleaded guilty to obstructing an SEC probe into the scheme, which authorities said involved over $600 million between January 2021 and October 2023.
"Cherry-picking" involves assigning profitable trades to favored investors while allocating losing trades to others. Prosecutors accused Leech of waiting to see trade performance before retroactively allocating them to clients to boost revenue and his own compensation. He allegedly steered better trades to "Macro Opportunities" portfolios, which he considered his best ideas, and worse trades to "Core" and "Core Plus" portfolios.
Leech pleaded guilty in June to one obstruction charge and faces a recommended prison sentence of six to 12 months, with four fraud charges dropped. His former employer, Western Asset Management Co (Wamco), agreed in June to pay a $100 million civil penalty to resolve SEC civil charges for failing to properly supervise him. Wamco is part of Franklin Resources, known for its Franklin Templeton brand. The SEC stated that Tuesday's settlement, which requires court approval, would result in $103 million being returned to harmed investors. Neither Leech nor Wamco admitted wrongdoing.