The Star-Bond Fund Manager Facing Criminal Charges
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A prominent investment executive at a leading bond fund shop is facing up to twenty years in prison after being hit with criminal and regulatory charges over an alleged multi-year cherry-picking scheme.
Ken Leech, who is on leave from his co-chief investment officer role at Western Asset Management, earlier this week was hit with fraud-related charges from both federal prosecutors and the Securities and Exchange Commission. They allege that he allocated favorable trades to certain portfolios over others for a period spanning 2021 to 2023 and stood to gain financially from some of these trades.
"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," said Sanjay Wadhwa, acting director of the SEC's Division of Enforcement.
An attorney for Leech said he "acted properly at all times" and plans to "defend himself vigorously," while a spokesperson for Western said the firm takes "this matter extremely seriously."
Even before news of the charges dropped, the bond shop, known as Wamco for short, had been struggling with an investor exodus.
The firm had put Leech on leave and closed its $2 billion Macro Opportunities strategy in August, after receiving notification that the SEC was considering charges.
Investors subsequently pulled more than $55 billion from the firm's funds and other strategies.
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In addition to managing its own funds, Wamco serves as a subadvisor to other asset managers. A dozen mutual funds have dropped Wamco as a subadvisor since Leech was put on leave, including Russell Investments, SEI, John Hancock and Morningstar, Ignites' Daniel Gil reported. Learn more by clicking here or on the image below.
Wamco's parent company, Franklin Resources, is planning to take on greater operational control of the affiliate, according to another report.
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