Ken Leech agrees to pay SEC $3 million over trade allocation fraud

A federal court in Manhattan has been asked to approve a consent judgment requiring Ken Leech, former co-chief investment officer of Western Asset Management, to pay a $3 million penalty to the Securities and Exchange Commission and accept a bar from serving as an officer or director of any public company.

The SEC's November 2024 complaint alleged that Leech placed futures trades over a period spanning January 2021 through October 2023 and then withheld allocation decisions until near or after daily settlement prices were set, allowing him to direct profitable trades away from accounts that bore the losing positions.

Combined with the $100 million civil penalty Western Asset agreed to pay in June, the two settlements would return $103 million to clients whose portfolios absorbed the losing side of those allocations.

Western Asset is the fixed-income arm of Franklin Resources, based in Pasadena, California.

The SEC under Chairman Paul Atkins has said its enforcement posture is now centered on fraud causing direct investor harm. The Leech settlement fits that framework. Under 17 C.F.R. § 240.10b-5, the standard is whether a defendant employed a manipulative or deceptive device in connection with the purchase or sale of a security.