Former star bond manager Kenneth Leech will pay a $3 million fine to settle the Securities and Exchange’s civil case that alleged “cherry picking,” the SEC said on Tuesday.
Leech pleaded guilty in June to one obstruction charge, and could face six to 12 months in prison under recommended federal sentencing guidelines, according to a report from Reuters. Prosecutors dropped four fraud charges
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, according to the Reuters report.
As InvestmentNews reported in 2025, Leech, despite being media shy, was long renowned for his trading skills and was the star bond manager at Western – the face of its highly regarded aptitude in the fixed-income world.
After Leech was charged in late November 2024 by the SEC and Department of Justice, clients pulled tens of billions of dollars from Western, which Franklin acquired as part of its purchase of Legg Mason in 2020, according to InvestmentNews.
"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, according to Reuters.
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, according to Reuters. He also allegedly steered better trades to "Macro Opportunities" portfolios that he said reflected his best ideas, and worse trades to "Core" and "Core Plus" portfolios.
Tuesday's civil 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, according to the report. Prosecutors accused Leech of lying during sworn SEC testimony by answering yes when asked if he had "an allocation in mind" when placing trades.
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