Kenneth Leech, the former co-chief investment officer at Western Asset Management Co., pleaded guilty on June 12 to obstructing an SEC investigation into his trading practices. The plea came just three days before he was set to stand trial on multiple fraud charges.

Leech admitted to providing false and misleading testimony during the SEC’s probe into what regulators have described as a “cherry-picking” scheme. He allegedly routed winning trades to his favored clients and dumped the losers on everyone else.

The scheme and the numbers behind it

The investigation centered on Leech’s trading allocation practices at Western Asset Management from January 2021 through October 2023. During that period, prosecutors alleged that Leech steered profitable trades toward preferred client portfolios while saddling other accounts with losses.

The favored strategies allegedly racked up more than $600 million in net first-day gains from the cherry-picked allocations.

Leech, now in his early 70s, was initially charged in November 2024 with securities fraud, investment adviser fraud, and making false statements. By pleading guilty to the single obstruction count, Leech avoided what would have been a far more complex and potentially devastating trial.

Western Asset Management’s own reckoning

Western Asset Management Co., a subsidiary of Franklin Templeton, reached its own civil settlement with the SEC in early June. The firm agreed to pay a $100 million penalty to resolve related charges. WAMCO did not admit to any wrongdoing as part of that settlement.

The settlement reflects what the SEC characterized as broader compliance failures within the organization during the period in question.

After the charges against Leech first surfaced in late 2024, the firm saw significant client outflows as institutional investors reassessed whether their assets were being managed fairly.

What this means for investors

The case also underscores a persistent challenge for regulators. Cherry-picking schemes require forensic analysis of trade allocation patterns over time, and they often only surface after whistleblowers or statistical anomalies trigger an investigation. The nearly three-year duration of the alleged scheme before it was caught raises obvious questions about how many similar practices might be flying under the radar elsewhere.

Leech’s sentencing has not yet been scheduled. The obstruction charge he pleaded to carries lighter penalties than the full slate of fraud charges he originally faced.