The SEC has charged Ken Leech with fraud. The bond trader was former co-chief investment officer at Western Asset Management (WAMCO), which holds US$336.1 billion AUM as of October 2024.
Alongside the SEC’s complaint, the US Attorney’s Office for the Southern District of New York has announced charges against Leech for securities fraud, investment adviser fraud, commodity trading adviser fraud, commodities fraud, and making false statements.
Leech placed trades with brokers and waited until later in the trading day to allocate them to client portfolios, the SEC alleges. Favoured portfolios benefited from first-day gains while others were allocated net losses, disguising losses from poor trades in portfolios using the ‘Macro Opportunities’ trading strategy and disadvantaging those using the firm’s ‘Core’ trading strategies.
Investigations into Leech’s trading practices began in August, prompting the co-chief investment officer to take a leave of absence and tanking WAMCO parent Franklin Templeton’s stock price by 12.5%.
According to the US Attorney’s charges, more than US$600 million in profits and losses were involved in this cherry-picking between January 2021 and October 2023. Some Treasury futures and options Leech allocated had first-day gains of more than US$1 million, the authority stated.
Andrew Dean, co-chief of the Division of Enforcement’s asset management unit, commented: “This alleged behaviour is an egregious abuse of power. By hand-picking trades and sending them to portfolios he favoured, Leech allegedly stood to profit personally and professionally.”
“The scale and duration of Leech’s allegedly fraudulent conduct amounts to a shocking betrayal of his fiduciary obligations to his clients, who paid dearly for his transgressions,” added Sanjay Wadhwa, acting director of the Division Enforcement.
Charges have not been made against WAMCO, however the US Attorney’s statement notes that the firm assured investors that Leech and others decided where to allocate trades before they were made.
©Markets Media Europe 2024
