(Bloomberg) -- Former Western Asset Management Co. co-Chief Investment Officer Ken Leech was sued by US regulators for engaging in an alleged “cherry-picking” scheme to disproportionately allocate better performing trades to favored portfolios and worse-performing trades to others.
The Securities and Exchange Commission sued Leech in federal court in Manhattan on Monday, alleging that he allocated trades hours after executing them, often waiting until the end of the trading day or afterward, which went against the firm’s training for portfolio managers.
“In the interim, Leech had the opportunity to see whether the market value of his trades went up or down,” the SEC said in its complaint. That allowed him to allocate hundreds of millions of dollars of trades with first-day gains to portfolios he favored, while sending those with net first-day losses to ones he didn’t.
Leech was placed on a leave of absence earlier this year after Wamco disclosed he had received a notice of a possible enforcement action from the SEC.
