Court approval would result in $103 million returned to harmed investors
WASHINGTON D.C. — The Securities and Exchange Commission today moved for the entry of a final judgment by consent against Stephen Kenneth Leech II, the former co-chief investment officer of registered investment adviser Western Asset Management Company LLC. Leech was previously charged by the regulatory agency with orchestrating a sophisticated, multi-year cherry-picking allocation scheme that manipulated futures trades to the severe detriment of specific client portfolios.
According to the comprehensive allegations detailed in the SEC’s November 2024 complaint, the illicit trading strategy took place continuously from at least January 2021 through October 2023. During this multi-year timeframe, Leech placed substantial market trades and then routinely delayed their official allocations until very close to, or entirely after, the exact moments when futures markets established their daily settlement prices.
This calculated delay provided Leech with an unfair, inside advantage, allowing him to carefully observe short-term price movements before assigning the trades. Armed with hindsight regarding how the market moved, he disproportionally allocated hundreds of millions of dollars in realized and unrealized first-day gains to favored client portfolios. Conversely, he assigned a similarly massive amount of realized and unrealized first-day losses to disfavored portfolios, shifting the financial burden and risk entirely onto unsuspecting and vulnerable clients.
Under the terms of the proposed consent agreement, Leech has agreed—without admitting or denying the allegations set forth in the SEC’s complaint—to the entry of a final judgment, which remains subject to final approval by the court. If approved, the judgment will order Leech to pay a $3 million civil monetary penalty. Furthermore, the court order will impose a strict officer-and-director bar, preventing him from ever serving in leadership positions at public companies, and permanently enjoin him from future violations of the antifraud provisions enshrined in federal securities laws. In addition to these severe regulatory and financial penalties, Leech has also agreed to a forthcoming associational bar that will permanently prohibit him from associating with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.
This latest enforcement action builds upon a broader regulatory crackdown involving the advisory firm itself. In June 2026, the Commission instituted settled public administrative proceedings against Western Asset Management Company LLC. In that administrative order, the firm was slapped with a massive $100 million civil penalty. Crucially, that corporate resolution also established a Fair Fund specifically designed to collect and distribute money back to the affected investors whose accounts were systematically mistreated and placed into the disfavored portfolios during Leech’s tenure.
Brent Wilner, Associate Director of the SEC’s Los Angeles Regional Office, underscored the severity of the misconduct and the overarching goals of the multi-pronged enforcement actions. "The conduct by Leech and Western Asset was an egregious breach of fiduciary obligations to their clients," Wilner stated. "Together, the resolution with Leech, if approved by the court, and the SEC’s prior settlement with Western Asset will return $103 million and provide meaningful relief to harmed investors, and reinforce that advisers must put clients first, every time."
The regulatory fallout for Leech extends far beyond civil securities enforcement, crossing directly into the criminal justice system. Also in June 2026, Leech formally pleaded guilty in the U.S. District Court for the Southern District of New York to severe criminal charges of obstruction of justice. The criminal charge stemmed directly from false and misleading testimony that Leech provided under oath to SEC investigators during the agency’s exhaustive underlying investigation. Federal prosecutors and defense attorneys are currently preparing for his formal sentencing hearing, which is scheduled to take place in the coming weeks.
Throughout the complex, multi-agency investigation and prosecution, the Securities and Exchange Commission coordinated closely with federal law enforcement partners. The SEC formally acknowledged and expressed its deep appreciation for the vital investigative assistance provided by the U.S. Attorney’s Office for the Southern District of New York as well as the Federal Bureau of Investigation.
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