In follow-up to a 2024 enforcement case, the SEC charged RIA, Western Asset Management Company, LLC for failing to take reasonable steps to detect and prevent its former co-Chief Investment Officer’s alleged cherry-picking scheme. Western Asset, which manages more than $180 billion in RAUM, agreed to pay a $100 million civil penalty in connection with the settlement. In the 2024 case, the SEC charged Steven Kenneth Leech, the firm's former co-CIO in a litigated district court action alleging that he engaged in a cherry-picking scheme from January 2021 through October 2023 by disproportionately allocating hundreds of millions of dollars in trades with net realized and unrealized first-day gains to certain favored portfolios and hundreds of millions of dollars in trades with net realized and unrealized first-day losses to other, disfavored portfolios. The SEC found that Western Asset was aware that Leech’s trading and allocation practices diverged from those of other portfolio managers at the firm, and that Western Asset knew or should have known about such practices, but the firm failed to take reasonable steps to ensure that Leech’s actions were consistent with the firm’s fiduciary duties and its disclosures to clients, including that its investment allocations would be done in a manner that was fair and equitable. Additionally, the SEC found that Western Asset failed to implement its policies and procedures relating to reallocations and failed reasonably to supervise Leech. This case highlights the importance of ensuring that all employees, including executives, comply with compliance policies and procedures, and the economic and reputational risk to firms that are reluctant to challenge the actions of dominant personnel.