Ken Leech, the former co-chief investment officer of Western Asset Management, has agreed to a $3 million penalty in the Securities and Exchange Commission’s cherry-picking case, and the agency says that settlement, together with an earlier one by his firm, would put $103 million back with the investors who were hurt. The SEC asked a court on Oct. 6 to enter a final judgment against Leech by consent, and the $3 million does not become binding until a judge approves it.
The rest of the $103 million is already ordered. In June, the Commission settled its administrative case against Western Asset itself, ordering the firm to pay a $100 million civil penalty and creating a Fair Fund to distribute money to affected investors in the disfavored portfolios.
For anyone who held Western Asset’s Core or Core Plus portfolios between January 2021 and October 2023, the open question is practical: whether an account was among those the SEC says were shortchanged, and when any money would reach it. No claim form has been announced, and the order on the Fair Fund describes a distribution Western Asset calculates and pays on its own.
There is no claim form yet for the $103 million, and when the payout starts, the notices that come with it will carry several dates. The Settlement & Refund Recovery System includes the four-date rule for reading a settlement notice and a claim log and payment tracker.
Follow the Western Asset payout with the Settlement & Refund Recovery System tracker →
Two penalties behind one figure
The $103 million is a sum of two pieces that are at different stages. The larger piece is the $100 million civil penalty from the firm’s June settlement. According to the SEC’s order, Western Asset had to deposit the $100 million into an escrow account for the Fair Fund within ten days of the order. Trade publication PlanAdviser reported at the time that the penalty would go into a Fair Fund and that Western Asset would distribute the money to harmed investors.
The smaller piece, Leech’s $3 million, is the part still waiting on a judge. "If approved by the court," Brent Wilner, associate director of the SEC’s Los Angeles Regional Office, said in the Oct. 6 release, the Leech resolution and the prior Western Asset settlement "will return $103 million and provide meaningful relief to harmed investors."
What Leech would agree to
Under the proposed judgment, Leech, whose full name in the SEC filing is Stephen Kenneth Leech II, would pay the $3 million penalty and accept an officer-and-director bar. He would also be permanently enjoined from violating the antifraud provisions of the federal securities laws, and he has agreed to an associational bar that has yet to be entered. He consented without admitting or denying the SEC’s allegations, the release says.
A separate criminal matter is moving on its own track. The SEC says Leech pleaded guilty in June 2026 in the U.S. District Court for the Southern District of New York to obstruction of justice charges tied to false and misleading testimony he gave the commission, and that sentencing is expected in the coming weeks. The SEC credited the U.S. Attorney’s Office for the Southern District of New York and the FBI for their work.
The trading the SEC describes
Cherry-picking, in the SEC’s account, means choosing which client gets a trade after seeing how it turns out. According to the commission’s November 2024 complaint, Leech placed trades and routinely delayed allocating them until near or after futures markets set daily settlement prices. That timing, the SEC alleges, let him assign "hundreds of millions of dollars in realized and unrealized first-day gains" to favored portfolios and a similar amount of losses to disfavored ones. Wilner called the conduct "an egregious breach of fiduciary obligations to their clients." The SEC’s release gives the period as at least January 2021 through October 2023.
A distribution with no claim form attached
The Fair Fund is aimed at current and former investors in the Core and Core Plus portfolios that were financially harmed during that period. Accounts in which Western Asset or its current or former officers or directors held a financial interest are excluded. Western Asset is responsible for running the fund, and it may hire a professional administrator at its own cost, not out of the fund.
The order sets a sequence of steps. Western Asset has to submit a calculation to SEC staff within 90 days of the order, and staff must approve it. A payment file is due within 90 days of staff approval, and the money must go out within 90 days after staff accepts that file. A final accounting follows within 150 days after the last payment. The order does not describe any process in which investors file claims.
Following the Western Asset Fair Fund
The SEC’s litigation release index lists the Leech case as release LR-26666, dated Oct. 6, and that is the place to watch for a court order approving the consent judgment. An investor in the Core or Core Plus portfolios, directly or through a retirement plan or fund, can ask the plan administrator or the adviser whether the account held those portfolios from 2021 through 2023.
Records worth pulling now are old statements showing the strategy name and the account’s balance across that stretch. The SEC release does not say how the distribution will be split among accounts, and the order leaves that to Western Asset’s calculation, so the paperwork that identifies the account is the part within reach.
Each stage of the order runs on a 90-day clock, with SEC staff review in the middle. Anyone contacted by someone offering to speed a payout for a fee is not describing anything in the SEC’s order.
Four dates will decide a Western Asset payout
A Fair Fund payout arrives as a calculation, a payment file and a disbursement, each with its own date, and an investor who misreads which one matters can miss the step that counts. The Settlement & Refund Recovery System opens with the four-date rule for reading a settlement notice, and it carries a claim log and payment tracker for noting when a Western Asset payment is announced and when it lands. Both come inside a 50-page system built for settlements that are proposed or paid automatically.
Get the four-date rule and payment tracker for the Western Asset Fair Fund →
This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
