Franklin’s Western Asset Management to Pay $100M in SEC Settlement

Western Asset Management Company, the fixed-income arm of Franklin Resources, has agreed to pay $100 million to settle SEC charges that it failed to stop a multi-year cherry-picking scheme by a former senior executive.

The SEC alleges that former co-chief investment officer Ken Leech executed trades, observed their performance, and then assigned winning trades to select portfolios while allocating losing trades to others. The affected portfolios were primarily in WAMCO's Core and Core Plus strategies.

As part of the settlement, the entire $100 million will be distributed through a Fair Fund to compensate harmed investors. WAMCO also accepted a censure and a cease-and-desist order, without admitting or denying the findings.

The SEC's case against Leech, filed in November 2024, remains ongoing. The settlement also resolves related investigations by the Department of Justice and other bodies.