The regulatory action centers on Leech’s management of the firm’s "Macro Opportunities" strategy between January 2021 and October 2023. Prosecutors contend that Leech prioritized these portfolios to offset significant losses incurred from Russian debt following the invasion of Ukraine and the collapse of Credit Suisse. By steering high-performing U.S. Treasury derivative trades to these accounts, he allegedly disadvantaged clients holding "Core" and "Core Plus" funds.

While the Pasadena-based firm agreed to the settlement to avoid prolonged litigation, it did not admit to wrongdoing. The SEC maintains that Wamco management was aware that Leech’s allocation practices deviated from standard firm protocols but failed to intervene or ensure equitable treatment for all clients. Leech, who faces a criminal trial in Manhattan on June 15, has pleaded not guilty to four counts of fraud and one count of making false statements.

The fallout has been significant for the firm’s bottom line. Wamco’s assets under management dropped to $228.9 billion by the end of March, down from $381.1 billion just before the investigation into Leech’s trading surfaced. Morningstar data indicates that the Western Asset Core Plus Bond fund, once a consistent performer, lagged behind 95% of its peers during the period of the alleged misconduct.