NEW YORK, Oct 6 (Reuters) – Kenneth Leech, the former star bond manager who pleaded guilty to obstructing a US Securities and Exchange Commission probe into alleged “cherry-picking,” will pay a $3 million fine to settle the regulator’s related civil case, the SEC said on Tuesday.
• Leech’s fine is in addition to the $100 million civil penalty that his former employer Western Asset Management Co, or Wamco, agreed to pay in June to resolve SEC civil charges it failed to properly supervise him
• “Cherry-picking” is the assigning of profitable trades to favored investors and losing trades to other investors. Authorities said Leech’s alleged scheme involved more than $600 million and ran from January 2021 to October 2023
• Tuesday’s settlement requires court approval, and would result in $103 million being returned to harmed investors, the SEC said
• Leech and Wamco did not admit wrongdoing. Lawyers for Leech did not immediately respond to requests for comment
• Authorities accused Leech of waiting to see how trades performed on their first day before retroactively allocating them to clients, to boost Wamco revenue and his own compensation
• Leech allegedly steered better trades to “Macro Opportunities” portfolios that he said reflected his best ideas, and worse trades to “Core” and “Core Plus” portfolios
• Prosecutors accused Leech of lying during sworn SEC testimony by answering yes when asked if he had “an allocation in mind” when placing trades
• Leech pleaded guilty in June to one obstruction charge, and could face six to 12 months in prison under recommended federal sentencing guidelines. Prosecutors dropped four fraud charges
• Wamco is part of Franklin Resources, whose brands include Franklin Templeton
(Reporting by Jonathan Stempel in New York; Editing by Jonathan Spicer )
