SEC Seeks $3 Million Judgment and Permanent Bars Against Former Western Asset Co-CIO Ken Leech
SEC seeks final judgment against ex-Western Asset co-CIO Ken Leech, including a $3 million penalty and permanent bars over alleged cherry picking scheme.
Summary
On October 6, 2026, the SEC sought a consent final judgment against Stephen Kenneth Leech II, former co-chief investment officer of registered adviser Western Asset Management Company LLC, in SEC v. Leech, No. 1:24-cv-09017, filed November 25, 2024, in the Southern District of New York. Without admitting the allegations, Leech agreed, subject to court approval, to a $3 million penalty, an officer-and-director bar, a forthcoming associational bar, and permanent injunctions under Securities Act Sections 17(a)(1) and (3), Exchange Act Section 10(b) and Rules 10b-5(a) and (c), Advisers Act Sections 206(1) and (2), and Investment Company Act Section 36(a).
The November 2024 complaint alleges Leech delayed trade allocations from at least January 2021 through October 2023 until near or after futures settlement prices were set, directing hundreds of millions of dollars in realized and unrealized first-day gains to favored portfolios and a similar amount of losses to disfavored portfolios. In June 2026, the SEC ordered Western Asset to pay a $100 million civil penalty and created a Fair Fund for affected investors. Leech also pleaded guilty that month to obstructing justice through false and misleading SEC testimony, with sentencing expected in the coming weeks. Ronnie Lasky, Brian Fitzpatrick, Sarah Nilson, Corey Schuster and Brent Wilner handled or supervised the investigation; Christopher Colorado and Dan Loss supervised litigation; Jennifer Ferris, Michael Barnes, Thomas Dunn and Stephen Graham assisted. The SEC credited the Southern District of New York U.S. Attorney’s Office and FBI.
Positives
- The June 2026 Fair Fund is designated to distribute money to investors affected by allocations to disfavored Western Asset portfolios.
- Western Asset was ordered to pay a $100 million civil penalty in settled SEC administrative proceedings.
- The proposed judgment would impose a $3 million penalty, permanent securities-law injunctions and officer-and-director and associational bars on Leech.
- The SEC coordinated with the Southern District of New York U.S. Attorney’s Office and FBI.
Risks & concerns
- Hundreds of millions of dollars in first-day gains allegedly went to favored portfolios while a similar amount of losses went to disfavored portfolios.
- The alleged allocation scheme lasted from at least January 2021 through October 2023.
- Leech pleaded guilty in June 2026 to obstructing justice through false and misleading testimony to the SEC.
- The proposed final judgment remains subject to court approval, and Leech did not admit the SEC’s allegations.
- Investors in disfavored Western Asset portfolios required a Fair Fund following the alleged allocation misconduct.
