SEC Seeks Final Judgment Against Former Western Asset Co-CIO Ken Leech in Cherry Picking Case
The Securities and Exchange Commission moved to enter a final consent judgment against Stephen Kenneth Leech II, the former co‑chief investment officer at Western Asset Management, over an alleged multi‑year cherry‑picking allocation scheme. The proposed judgment would require Leech to pay a $3 million penalty, accept an officer‑and‑director bar, and be permanently enjoined from violating federal antifraud provisions, subject to court approval.
Why It Matters
If approved, the judgment plus a prior Western Asset settlement would return $103 million to investors harmed by the alleged misallocations and signal continued regulatory enforcement against adviser misconduct. The action follows both SEC civil charges and a criminal guilty plea by Leech for obstruction of justice related to the agency’s investigation.
Key Facts
- Defendant: Stephen Kenneth Leech II (former co-CIO, Western Asset Management Company LLC)
- Allegation period: At least January 2021 through October 2023
- Nature of alleged misconduct: Cherry‑picking: delaying trade allocations to allocate first‑day gains to favored portfolios and first‑day losses to disfavored portfolios
- SEC civil action filed: Complaint filed November 2024 (allegations)
- Proposed civil penalty for Leech: $3 million (consent, subject to court approval)
The Securities and Exchange Commission has asked a court to enter a final judgment by consent against Stephen Kenneth Leech II, who served as co‑chief investment officer at registered investment adviser Western Asset Management Company LLC. The SEC’s November 2024 complaint alleges that, from at least January 2021 through October 2023, Leech executed trades and then routinely postponed allocating them until around or after futures markets fixed daily settlement prices. That timing, the SEC says, enabled him to see price movements and disproportionately assign hundreds of millions of dollars in first‑day gains to favored accounts and a comparable amount of first‑day losses to disfavored accounts.
Under the consent terms submitted to the court, and without admitting the SEC’s allegations, Leech would pay a $3 million civil penalty, accept an officer‑and‑director bar, and be permanently enjoined from violating antifraud provisions of the federal securities laws. The filing also notes an upcoming associational bar against Leech. All of those measures are contingent on court approval.
The Leech action follows a separate June 2026 SEC administrative settlement with Western Asset, in which the firm agreed to pay a $100 million civil penalty and to establish a Fair Fund to distribute money to investors in the disfavored portfolios. Together, the SEC said the two resolutions would result in $103 million being returned to harmed investors. Brent Wilner, an SEC associate director in Los Angeles, described the conduct as an egregious breach of fiduciary duties.
In a related criminal development, Leech pleaded guilty in June 2026 in U.S. District Court for the Southern District of New York to obstruction of justice for giving false and misleading testimony to the SEC during its probe. Sentencing in that matter is scheduled in the coming weeks. The SEC acknowledged assistance from the U.S. Attorney’s Office for the Southern District of New York and the FBI in its announcement.