Wall Street’s securities watchdog is all set to be paid by Franklin Templeton’s Western Asset Management a $100 million civil penalty to settle an inquiry into one of its previous star bond investors, Ken Leech.
Apparently, besides the $100 million civil penalty, the US prosecutors had already charged Leech in November 2024 with criminal fraud, saying that he ran a $600 mn cherry-picking scheme that wrongly allocated trades to specific Western Asset Management portfolios. His trial is due to start on June 15. The fixed-income manager, which had assets under management of about $229 billion as of March 2026, had not been able to take adequate measures to identify and avoid such actions by its former co-CIO and was mindful that his trading and allocation practices differed from the practices of other portfolio managers, the US Securities and Exchange Commission confirmed on June 5, 2026, in a filing that announced the settlement.
It is worth noting that Western has seen long-term net outflows of over $150 billion ever since the watchdog charged the former co-chief investment officer of Western in 2024, adding to pre-existing concerns regarding the unit’s overall performance. In the second quarter, reported late April 2026, Franklin Templeton saw long-term net inflows of $17bn in both public and private markets, including a $4.1bn outflow from Western.
According to a spokesperson for $1.7 tn in assets Franklin Templeton on behalf of Western Asset Management, “The Department of Justice has notified Western Asset Management that it has concluded its investigation of certain past trade allocations made by former co-CIO Kenneth Leech with no further action, issuing a formal declination. Agreeing to this settlement was a business decision for our company that avoids the distraction of prolonged litigation, allowing Western Asset to put this matter behind us and focus fully on our clients.”
Notably, in 2025, Franklin revamped its leadership team, adding a co-president and its first chief commercial officer, Daniel Gamba, to lead its drive into private markets and stop the tide of redemptions that were fueled by the Western controversy. Leech faces separate criminal charges, and the trial is scheduled to begin on June 15 in New York.