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. The move follows charges previously brought by the SEC against Leech for orchestrating a sophisticated, multi-year cherry-picking allocation scheme that manipulated futures trades at the expense of certain client portfolios.
According to the complaint initially filed by the SEC in November 2024, the fraudulent activity took place over a nearly three-year period, spanning from at least January 2021 through October 2023. During this timeframe, Leech engaged in a deceptive trading practice wherein he placed trades and then routinely delayed their formal allocations. By holding off on assigning the trades until near or after the exact moments when futures markets set their daily settlement prices, Leech was able to observe how the market prices moved in real time.
This unfair timing advantage allowed him to disproportionately allocate hundreds of millions of dollars in realized and unrealized first-day gains to favored client portfolios. Conversely, the disfavored portfolios were systematically saddled with a similarly massive amount of realized and unrealized first-day losses. This deliberate manipulation of trade assignments represented a fundamental betrayal of client trust and a direct violation of federal securities laws designed to protect investors from discriminatory treatment by their investment managers.
In response to the SEC’s legal actions, Leech has consented to the entry of a final judgment, though this agreement remains subject to final court approval. Under the terms of the proposed judgment, Leech would be ordered to pay a $3 million civil monetary penalty. Furthermore, the judgment would impose a strict officer-and-director bar, preventing him from serving in leadership roles at public companies, and would permanently enjoin him from future violations of the antifraud provisions of federal securities laws. To complete the regulatory enforcement measures, Leech has also agreed to a forthcoming associational bar that will prohibit him from working in the securities industry. He has consented to these severe penalties without admitting or denying the allegations set forth in the SEC’s complaint.
The civil enforcement action against Leech is part of a broader regulatory reckoning for Western Asset Management Company LLC. In June 2026, the Commission instituted settled public administrative proceedings against the advisory firm itself. As part of that administrative resolution, Western Asset was ordered to pay a substantial $100 million civil penalty. Crucially, the order also established a Fair Fund designed specifically to channel money back to the affected investors who had been relegated to the disfavored portfolios during Leech’s tenure.
Brent Wilner, Associate Director of the SEC’s Los Angeles Regional Office, emphasized the gravity of the misconduct and the significance of the financial recoveries secured for the victims. "The conduct by Leech and Western Asset was an egregious breach of fiduciary obligations to their clients," Wilner stated. He added that the combined enforcement actions deliver substantial financial relief and serve as a stern reminder to the broader financial advisory community. "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 penalties and civil judgments are only one facet of the legal fallout facing the former investment executive. Also in June 2026, Leech faced criminal accountability when he pleaded guilty in U.S. District Court for the Southern District of New York to criminal obstruction of justice charges. The criminal charge stemmed directly from false and misleading testimony that Leech provided to SEC investigators during the course of their exhaustive investigation into the trading scheme. Federal authorities noted that his attempts to mislead regulators compounded the severity of his offenses. Sentencing in the criminal matter is scheduled to take place in the coming weeks.
The SEC formally acknowledged the critical investigative assistance and collaborative support provided by the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation throughout the parallel civil and criminal proceedings.
Comments (0)