Key Takeaways
- Ken Leech, the co-CIO of a Franklin Resources unit, took a leave of absence after receiving a Wells Notice from the Securities and Exchange Commission (SEC).
- The departure came as the company and federal regulators have been investigating certain past trade allocations in some Western Asset Management accounts.
- Western Asset said in light of Leech’s exit, it has closed its Macro Opportunities fund in what it called the “best interests” of clients.
Franklin Resources (BEN) was the worst-performing stock in the S&P 500 Wednesday after the investment manager reported that Ken Leech, the co-Chief Investment Officer (CIO) of its Western Asset Management unit, was on a leave of absence after receiving a Wells Notice from the Securities and Exchange Commission (SEC).
In an SEC filing, Western Asset Management said that because of Leech’s exit, it has determined that it would be “in clients’ best interests” to close its Macro Opportunities fund, which had approximately $2.0 billion in assets under management (AUM) as of July 31.
Franklin Had Announced Internal Investigation Last Month
In a regulatory filing last month, Franklin Resources announced that it had launched an internal investigation into “certain past trade allocations of treasury derivatives in select Western Asset Management” managed accounts. It explained that the company was also cooperating with parallel government probes by the SEC and the U.S. Department of Justice (DOJ). Franklin Resources added Wednesday that it would “take action as warranted” following its investigation.
Western Asset said that co-CIO Michael Buchanan, who shared the role with Leech, will now be the CIO.
Shares of Franklin Resources sank 8% as of 2:45 p.m. ET Wednesday to $20.81, their lowest level since November 2020. They are down 30% in 2024.