(Bloomberg) — The former chief investment officer at Western Asset Management Co . 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 markets to others.
The Securities and Exchange Commission sued Leech in federal court in Manhattan on Monday, alleging that he distributed trades hours after they were executed, often waiting until the end of the trading day or later, which went against the training of firm for portfolio managers.
“In the meantime, Leech had the opportunity to see whether the market value of his trades increased or decreased,” the SEC said in its complaint. This allowed him to distribute hundreds of millions of dollars in first-day winning trades to the portfolios he favored, while sending those with first-day net losses to those he did not.
Leech was placed on leave earlier this year after Wamco disclosed it had received a notice of potential enforcement action from the SEC.