US SEC passes final judgment on cherry-picking allocation scheme case
07 October 2026 US
Image: Garun Studios/stock.adobe.com
The Securities and Exchange Commission (SEC) moved for 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, whom the SEC previously charged with a multi-year cherry-picking allocation scheme.
As alleged in the SEC’s November 2024 complaint, from at least January 2021 through to October 2023, Leech placed trades and then routinely delayed allocations until near or after futures markets set daily settlement prices.
According to the Commission, this allowed him to observe price movements and disproportionately allocate hundreds of millions of dollars in realised and unrealised first?day gains to favoured portfolios and a similar amount of realised and unrealised first?day losses to disfavoured portfolios.
Without admitting the allegations in the SEC’s complaint, Leech consented to entry of a final judgment, subject to court approval, that would order him to pay a US$3 million penalty, impose an officer-and-director bar, and permanently enjoin him from violating anti-fraud provisions of federal securities laws.
Leech also agreed to a forthcoming associational bar against him.
In June 2026, the Commission instituted settled public administrative proceedings against Western Asset, ordering the firm to pay a US$100 million civil penalty and establishing a Fair Fund to distribute money to affected investors in the disfavored portfolios.
Brent Wilner, Associate Director of the SEC’s Los Angeles Regional Office, says: “The conduct by Leech and Western Asset was an egregious breach of fiduciary obligations to their clients.
“Together, the resolution with Leech, if approved by the court, and the SEC’s prior settlement with Western Asset will return US$103 million and provide meaningful relief to harmed investors, and reinforce that advisers must put clients first, every time.”
Also in June 2026, Leech pleaded guilty in U.S. District Court in the Southern District of New York to obstruction of justice charges related to false and misleading testimony he provided to the SEC during its investigation; sentencing will take place in the coming weeks.
The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York and the FBI.
As alleged in the SEC’s November 2024 complaint, from at least January 2021 through to October 2023, Leech placed trades and then routinely delayed allocations until near or after futures markets set daily settlement prices.
According to the Commission, this allowed him to observe price movements and disproportionately allocate hundreds of millions of dollars in realised and unrealised first?day gains to favoured portfolios and a similar amount of realised and unrealised first?day losses to disfavoured portfolios.
Without admitting the allegations in the SEC’s complaint, Leech consented to entry of a final judgment, subject to court approval, that would order him to pay a US$3 million penalty, impose an officer-and-director bar, and permanently enjoin him from violating anti-fraud provisions of federal securities laws.
Leech also agreed to a forthcoming associational bar against him.
In June 2026, the Commission instituted settled public administrative proceedings against Western Asset, ordering the firm to pay a US$100 million civil penalty and establishing a Fair Fund to distribute money to affected investors in the disfavored portfolios.
Brent Wilner, Associate Director of the SEC’s Los Angeles Regional Office, says: “The conduct by Leech and Western Asset was an egregious breach of fiduciary obligations to their clients.
“Together, the resolution with Leech, if approved by the court, and the SEC’s prior settlement with Western Asset will return US$103 million and provide meaningful relief to harmed investors, and reinforce that advisers must put clients first, every time.”
Also in June 2026, Leech pleaded guilty in U.S. District Court in the Southern District of New York to obstruction of justice charges related to false and misleading testimony he provided to the SEC during its investigation; sentencing will take place in the coming weeks.
The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York and the FBI.
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