SEC Seeks Final Judgment Against Former Western Asset Co-CIO Ken Leech in Cherry Picking Case

The SEC is asking a court to approve a final judgment against former Western Asset co-CIO Ken Leech. It would permanently stop him from violating federal antifraud laws. It would also bar him from serving as an officer or director.

The case concerns cherry-picking, where an adviser delays assigning trades until prices reveal winners and losers. From January 2021 through October 2023, Leech allegedly waited around daily futures settlement prices. He then steered hundreds of millions in first-day gains toward favored portfolios, while sending similar losses to disfavored portfolios.

The proposed judgment requires a $3 million penalty, an associational bar, and court approval, without Leech admitting wrongdoing. It would also impose the permanent injunction and officer-director bar. Combined with Western Asset’s $100 million settlement, the resolutions are expected to return $103 million to affected investors.

Cherry picking is secretly steering the best trades to favored accounts after seeing which investments gained or lost. It matters because other clients are left with losses, violating an adviser’s duty to treat clients fairly.

In the SEC’s case, former Western Asset co-CIO Stephen Kenneth Leech II placed trades but delayed assigning them until near or after futures markets’ daily settlement prices. From January 2021 through October 2023, this let him direct hundreds of millions in first-day gains to favored portfolios and similar losses to disfavored ones.

The SEC is seeking court approval of a $3 million penalty, a permanent ban on certain misconduct, and an officer-and-director bar. Western Asset separately paid $100 million, creating a Fair Fund for affected investors. Together, the resolutions could return $103 million, while Leech’s guilty plea for obstructing the investigation underscores the serious consequences.

Delaying an allocation meant Leech could wait until near or after the futures market’s daily settlement price. He could then see which trades gained or lost value before assigning them to client portfolios.

According to the SEC, this happened routinely from January 2021 through October 2023. After seeing a trade’s early gain, he could place it in a favored portfolio, while assigning an early loss to a disfavored one. The SEC says this directed hundreds of millions of dollars in first-day gains. It sent a similar amount in first-day losses to disfavored portfolios.

In June 2026, Western Asset agreed to pay a $100 million penalty, with a Fair Fund for affected investors. Leech consented to a proposed $3 million penalty, permanent injunction, and officer-and-director bar, subject to court approval. The case shows why advisers must allocate trades fairly and promptly. They cannot use later price information to favor selected clients or distort fair treatment.

The alleged scheme moved hundreds of millions of dollars in first-day gains to favored portfolios, while shifting a similar amount of losses to disfavored portfolios. This mattered because clients received different outcomes based on allocation timing, not simply investment performance.

From January 2021 through October 2023, former Western Asset co-CIO Ken Leech placed trades, then delayed allocations. He waited until futures markets set daily prices, watched market moves, and directed profitable trades toward favored accounts. The SEC says this produced realized and unrealized first-day gains and losses.

Leech consented to a proposed $3 million penalty, an officer-and-director bar, and a permanent injunction, subject to court approval. Western Asset previously agreed to a $100 million penalty and a Fair Fund for harmed investors. Together, the resolutions would provide $103 million in penalties and investor relief, reinforcing that advisers must put clients first.

The article does not identify individual favored or disfavored portfolios. Favored portfolios received unusually profitable trades, while disfavored portfolios absorbed unusually poor results. Advisers owe clients fair treatment because they manage client money under a fiduciary duty.

Leech’s case involved trades placed from January 2021 through October 2023. He delayed allocations until near or after daily futures settlement prices, revealing which trades had gained or lost. Hundreds of millions in first-day gains went disproportionately to favored portfolios, while similar losses went to disfavored portfolios.

Fair allocation protects clients from hidden favoritism and ensures results reflect investment decisions, not selective timing. In June 2026, Western Asset paid a $100 million penalty, and a Fair Fund was created for affected investors. Leech’s proposed $3 million penalty would bring the combined recovery to $103 million, pending court approval.

When an adviser puts some clients ahead of others, regulators can seek money and restrictions to repair the harm. Remedies can include a Fair Fund for investors. They can also include civil penalties against firms and payments or penalties from responsible individuals.

In the Western Asset case, the SEC established a Fair Fund after ordering the firm to pay $100 million. The fund is intended to distribute money to investors in disfavored portfolios. Former co-CIO Ken Leech faces a proposed $3 million penalty. This approach links investor relief to the firm’s penalty while separately holding an alleged decision-maker accountable.

Together, the proposed Leech resolution and Western Asset settlement could return $103 million. Leech also faces an officer-and-director bar, a permanent injunction, and an associational bar. Investors should watch the Fair Fund process for distribution details; individual recoveries and timing depend on court and administrative actions.