Western Asset Management Co, the fixed-income investment arm of Franklin Resources, will pay $100 million to settle civil charges brought by the U.S. Securities and Exchange Commission, the regulator said on Friday. The payment resolves civil allegations tied to a former executive's conduct without an admission of wrongdoing by the firm.
The enforcement action centers on conduct attributed to Kenneth Leech, a former co-chief investment officer at the asset manager commonly known as Wamco. The SEC's civil case relates to an alleged investment scheme. Leech has pleaded not guilty to criminal charges connected to related conduct in New York.
Franklin Resources disclosed in a regulatory filing that Wamco agreed to the $100 million settlement as a business decision to avoid protracted litigation. The company noted the agreement settles investigations into Wamco by both the SEC and the U.S. Department of Justice.
As part of the settlement, Western Asset Management did not admit to any wrongdoing, according to the SEC announcement. The regulatory statement framed the payment as a civil resolution between the agency and the asset manager, while related criminal proceedings involving the former executive remain separate.
Details provided by the regulator and the firm indicate the settlement concludes the civil enforcement track. The criminal case against the former co-chief investment officer is ongoing in the New York courts, where the defendant has entered a plea of not guilty.
Context and implications
While the settlement addresses the SEC's civil allegations and the DOJ's inquiry into Wamco, the criminal matter tied to the former executive continues independently. The regulatory filing from Franklin Resources described the decision to settle as a business judgment to sidestep extended litigation.
The announcement leaves intact the separate criminal proceedings against the former executive and clarifies that the settlement does not represent an admission of liability by the asset manager.
Summary
Western Asset Management, a unit of Franklin Resources, will pay $100 million to settle civil charges by the SEC related to allegations involving a former co-chief investment officer. Wamco did not admit wrongdoing and said the settlement was a business decision to avoid prolonged litigation. The former executive has pleaded not guilty to related criminal charges in New York. The settlement also resolves a DOJ inquiry into the firm.