Former Co-CIO Western Asset Management Fraud Charges – Latest Updates
The former Co-CIO of Western Asset Management, Stephen Kenneth (“Ken”) Leech, is facing fraud charges from the Securities and Exchange Commission. Allegedly, Leech participated in a deceptive scheme that involved favoring certain portfolios over others by allocating profitable trades to the chosen portfolios and assigning losing trades to less favored ones, a practice commonly referred to as cherry-picking.
According to the SEC’s complaint, this fraudulent activity took place between January 2021 and October 2023. Leech reportedly executed trades through brokers and strategically delayed the allocation of these trades until later in the trading day. This allowed him to pick and choose which portfolios would benefit from profitable trades and which would bear the burden of losses, providing an unfair advantage to certain portfolios at the expense of others.
Cherry-picking is a violation of securities laws as it creates an uneven playing field for investors and undermines the integrity of the market. By engaging in this unethical practice, Leech allegedly misallocated hundreds of millions of dollars in net first-day gains and losses, ultimately deceiving investors and breaching his fiduciary duty.
The SEC’s enforcement action serves as a reminder of the importance of transparency, fairness, and integrity in the financial markets. Investors rely on the trustworthiness of investment professionals to act in their best interests and uphold the highest ethical standards. Cases of fraudulent behavior like this highlight the need for robust regulatory oversight and enforcement to protect investors and maintain the integrity of the securities markets.
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