Western Asset Management, part of Franklin Templeton, has agreed to pay a $100m civil penalty to settle a US Securities and Exchange Commission (SEC) investigation linked to former bond investor Ken Leech.
US prosecutors charged Leech with criminal fraud in 2024, alleging he ran a “cherry-picking” scheme involving the allocation of trades to selected portfolios at Western Asset.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
In a filing, the SEC said the fixed income group, which managed about $229bn at the end of March 2026, had “failed to take reasonable steps to detect and prevent this conduct by its former co-CIO” and was “aware” his trading and allocation practices “diverged from those of other portfolio managers”.
The regulator’s order also said Western Asset did not properly carry out its policies and procedures on reallocations and did not reasonably supervise its former co-chief investment officer.
Since the regulator brought charges against Western’s former co-CIO in 2024, the firm has recorded more than $150bn in long-term net outflows, reported Financial times.
Franklin Templeton reported in late April that it generated $17bn in long-term net inflows across public and private markets in the second quarter, including a $4.1bn outflow from Western.
A spokesperson for $1.7tn-in-assets Franklin Templeton said on behalf of Western Asset Management: “The Department of Justice has notified Western Asset Management that it has concluded its investigation of certain past trade allocations made by former co-CIO Kenneth Leech with no further action, issuing a formal declination.”
The spokesperson added: “Agreeing to this settlement was a business decision for our company that avoids the distraction of prolonged litigation, allowing Western Asset to put this matter behind us and focus fully on our clients.”
Franklin changed its leadership team last year, adding Daniel Gamba as co-president and as the company’s first chief commercial officer, as it sought to expand further in private markets and respond to heavy redemptions tied to the Western case.
Leech also faces separate criminal charges, with his trial due to begin on June 15 in New York.
