WASHINGTON D.C., Nov. 25, 2024 — The Securities and Exchange Commission (SEC) announced on Friday charges against Stephen Kenneth "Ken" Leech, the former co-chief investment officer of Western Asset Management Company LLC (WAMCO), accusing him of conducting a fraudulent cherry-picking scheme. Leech is alleged to have manipulated trade allocations to benefit certain portfolios over others, a practice that violates federal securities laws.
According to the SEC's complaint, from January 2021 through October 2023, Leech would place trades and then delay the allocation of these trades among client portfolios he managed. This practice allowed him to observe market movements and subsequently allocate profitable trades to favored portfolios and unprofitable ones to less favored portfolios. The complaint alleges that this scheme led to hundreds of millions of dollars in net first-day gains for the favored portfolios.
Sanjay Wadhwa, Acting Director of the SEC's Division of Enforcement, condemned the alleged actions, stating, "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." Wadhwa emphasized that investment advisers must always prioritize their clients' interests, an obligation Leech is accused of neglecting for an extended period.
Andrew Dean, Co-Chief of the Division of Enforcement's Asset Management Unit, also commented on the case, describing Leech's alleged conduct as "an egregious abuse of power," which benefited him personally and professionally.
The SEC has filed its complaint in the United States District Court for the Southern District of New York, seeking various forms of relief including permanent and conduct-based injunctions, an officer-and-director bar, disgorgement, prejudgment interest, civil penalties, and more.
Simultaneously, the U.S. Attorney’s Office for the Southern District of New York has announced parallel charges against Leech. The SEC's ongoing investigation is being handled by members of the Asset Management Unit and the Los Angeles Regional Office, with assistance from the Division of Economic and Risk Analysis. The litigation will be led by a dedicated team under the supervision of Daniel Loss. The SEC has acknowledged the cooperation of both the U.S. Attorney’s Office for the Southern District of New York and the FBI in this matter.
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