SEC Pursues Final Judgment Against Ex-Western Asset Co-CIO in Cherry-Picking Case
Regulators move to close enforcement action against Ken Leech, former co-CIO of Western Asset Management, over alleged trade allocation fraud.
The Securities and Exchange Commission filed a motion seeking a final consent judgment against Stephen Kenneth Leech II, the former co-chief investment officer of Western Asset Management Company LLC, a registered investment adviser, in a case centered on alleged cherry-picking of trades.
Cherry-picking schemes typically involve a portfolio manager selectively allocating profitable trades to favored accounts while directing losing positions elsewhere — a practice that regulators regard as a serious breach of fiduciary duty and securities law. The SEC's move to enter a final judgment by consent indicates that Leech has agreed to the terms of a resolution without admitting or denying the underlying allegations, a standard enforcement mechanism the agency frequently employs.
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Western Asset Management, a subsidiary of Franklin Templeton, is one of the largest fixed-income investment managers in the United States, overseeing hundreds of billions of dollars in client assets. The case against its former co-CIO underscores the SEC's sustained focus on trade allocation practices that can disadvantage retail and institutional investors alike.
A consent judgment, if approved by the court, would formally conclude the civil enforcement proceedings against Leech and could include financial penalties, disgorgement of ill-gotten gains, and bars from the securities industry, though the specific terms disclosed in the SEC's motion were not detailed in the announcement. The agency has made prosecuting cherry-picking a regulatory priority in recent years, arguing that such conduct directly erodes investor trust in professional money management.
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