Western Asset Management Co. LLC agreed to pay a $100 million civil penalty to the Securities and Exchange Commission to resolve an investigation into the firm following cherry-picking allegations against the Franklin Resources subsidiary’s co-CIO, Ken Leech.
According to a 2024 complaint from the SEC, Leech, charged with fraud, assigned hundreds of millions of dollars of winning trades to favored clients of the boutique fixed-income manager, which benefited Leech at the expense of disfavored clients who faced losses.
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Leech pleaded not guilty to charges filed against him by the Department of Justice in December 2024.
According to a Friday statement from the SEC, Western Asset failed to take reasonable steps to detect and prevent Leech’s conduct, and the firm failed to implement the policies and procedures it had established relating to reallocations. The $100 million penalty will be paid out to investors harmed by Leech’s conduct.
“The SEC’s order finds that Western Asset willfully violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder and failed reasonably to supervise its former co-CIO within the meaning of Section 203(e)(6) of the Advisers Act,” the SEC stated. “Without admitting the SEC’s findings, Western Asset agreed to a cease-and-desist order, a censure, and to pay a civil penalty of $100 million. Pursuant to the SEC’s order, the civil penalty will be deposited into a Fair Fund, and Western Asset will distribute the funds to harmed investors.”
Franklin Resources Inc., commonly known as Franklin Templeton, disclosed the civil penalty in a Form 8-K filed June 5 with the SEC.
“On June 4, 2026, Western Asset reached a settlement with the SEC, resolving the SEC’s investigation in its entirety,” the submitted form stated. “Under the terms of the settlement, Western Asset, without admitting any wrongdoing, has agreed to pay a civil penalty of $100 million to be paid into a Fair Fund for the benefit of investors for the conduct set forth in the Settlement. … Western Asset agreed to the settlement as a business decision that it believes avoids the distraction of prolonged litigation and allows Western Asset to put this matter behind it and focus fully on its clients. These outcomes end the investigations of Western Asset by the DOJ and the SEC.”
