QUICK FACTS
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Ken Leech Fine Amount: $3 million (court-ordered civil penalty, 7 October 2026)
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Western Asset Management Fine Amount: $100 million (separate SEC settlement, 5 June 2026)
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Date: 25 November 2024
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Violation Period: January 2021 - October 2023
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Primary Violation: Alleged unfair Allocations (cherry-picking)
Ken Leech SEC Charge Overview
In November 2024, the SEC charged Stephen Kenneth ("Ken") Leech, the former co-chief investment officer of Western Asset Management Company LLC (“WAMCO”), alleging that he operated a fraudulent cherry-picking scheme from January 2021 through to October 2023.
According to the SEC's complaint, the scheme involved deliberately delaying trade allocations to observe price movements and then allocating favorable trades to certain portfolios while directing unfavorable trades to others.
In October 2026, a final judgement was entered by consent against Leech imposing a $3 million civil penalty. He consented without admitting the allegations in the SEC's complaint. WAMCO separately settled related SEC proceedings for $100 million in June 2026.
Details of the kEN lEECH sec Charge
The alleged scheme operated as follows:
Trade Execution Process:
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Leech placed trades through omnibus brokerage accounts, combining multiple client trades.
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Instead of immediate allocation, he waited hours after execution, often until market close.
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During this delay, he observed price movements in the traded securities.
Allocation Pattern:
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Trades showing first-day gains were disproportionately allocated to Favored Portfolios.
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Trades showing first-day losses were disproportionately allocated to Disfavored Portfolios.
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The statistical probability of this allocation pattern occurring by chance was less than one in one trillion.
The Scale of Impact:
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Over $600 million in net first-day gains were allocated to Favored Portfolios.
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Over $600 million in net first-day losses were allocated to Disfavored Portfolios.
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Favored Portfolios experienced 34 consecutive months of net first-day gains.
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Disfavored Portfolios suffered net first-day losses every month during the period.
Personal Benefit:
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Leech's incentive compensation was tied to firm revenue and portfolio performance.
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Favored Portfolios generated approximately four times more revenue per AUM dollar.
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In March 2023, Leech increased his personal investment in Favored Portfolios from $142,000 to $19 million.
Worked Examples
The following examples are allegations described in the SEC's November 2024 complaint.
Thirty-Year Treasury Bond Calls - June 17, 2021:
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Leech allocated a trade at a $159 strike price with >$1,000,000 loss to Disfavored Portfolios.
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Later, he allocated a trade at a $160.50 strike price with a ~$35,000 gain split between Favored and Disfavored Portfolios.
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Leech then allocated the best trade at a $161 strike price with a ~$164,000 gain to Favored Portfolios.
Thirty-Year Treasury Futures - November 4, 2021:
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Leech allocated the best trade at a $161.50 price with a ~$85,000 gain to Favored Portfolios.
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He then split the worst trade at a $161.25 price between Favored and Disfavored Portfolios.
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Later, he allocated the worst trade at a $160.25 price with a ~$357,000 loss to Disfavored Portfolios.
Ten-Year Treasury Futures Calls - March 17, 2022:
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Leech allocated a trade at a $126 strike price with ~$319,000 gain to Favored Portfolios.
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Shortly after, he allocated the worst trade at a $125.5 strike price with a ~$31,000 loss split between Favored and Disfavored Portfolios.
Ken Leech Fines and Penalties
The SEC and the court have imposed the following penalties and restrictions:
- Ken Leech: $3 million civil penalty, ordered by the court on 7 October 2026.
- Ken Leech: Permanent injunctions and an officer-and-director bar under the final judgment.
- Ken Leech: Separate SEC associational bar imposed on 14 October 2026.
- WAMCO: Separate $100 million SEC civil penalty and censure, ordered on 5 June 2026. The firm settled without admitting the SEC findings, except as to jurisdiction.
- Investor redress: The SEC established a Fair Fund to distribute the WAMCO penalty to affected investors.
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