Joint investigation by SEC and DOJ may lead to criminal charges (IGNITES)

Trading activity appears to be the focal point for a regulatory and criminal probe into an investment adviser who’s co-chief investment officer has subsequently taken a leave of absence. Western Asset Management, a fixed-income manager and Franklin Templeton subsidiary, has confirmed its co-chief investment officer is also a subject of the investigation. FrontLine Compliance Founder and President Amy Lynch believes that the firm’s co-CIO may be charged with unfair trading practices on certain client accounts since trade allocations are mentioned in a recent disclosure by the company. With the lead comments, she explains that this would typically mean he would be charged with cherry-picking accounts by favoring certain accounts when allocating trades. Ms. Lynch further states that the SEC only includes the DOJ in matters that are egregious, so the amount or volume of trades involved in the allegations could be large and criminal fraud charges may follow. But she cautions that none of this is known for certain at this time, as the complaint has not been formally filed. At the time of the investigation, the firm and its co-CIO were managing approximately $60 billion in assets overall. See IGNITES (subscription required), “Western Asset Probe Could Spell Trouble for Franklin”