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Rating:WHAM! SEC and DoL Smite Wamco to the Tune of $21MM Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, January 27, 2014

WHAM! SEC and DoL Smite Wamco to the Tune of $21MM

Reported by Neil Anderson, Managing Editor

A Legg Mason [profile] subsidiary is under regulatory fire.

Today the SEC and the DoL (Department of Labor) unveiled a joint settlement in which Legg's Wamco will repay more than $17.4 million, plus more than $3.6 million in penalties. The settlement comes for, in the words of the SEC, "concealing investor losses that resulted from a coding error and engaging in cross trading that favored some clients over others."

In response to the settlement, a spokeswoman for Legg Mason emailed MFWire the following statement:
Western is pleased to have resolved these two matters† with regulators.† These resolutions represent negotiated settlements of the outstanding matters in which Western neither admits nor denies the charges.†† Western chose to settle the matters to avoid the uncertainty, expense and distraction of litigation.† † These issues and forthcoming payments have not and will not have any material impact on Westernís financial condition, especially in light of the fact that a majority of the financial settlement amount is covered by insurance, nor have they impaired or will they impair the firmís ability to manage client accounts or provide services.† † Western Asset has always sought to meet a high standard of client and fiduciary standards and has redoubled its efforts over the past 5 years to address regulatory compliance and related matters including the strengthening of controls in the areas covered by the settlements.
Michele Wein Layne, director of the SEC's Los Angeles regional office, attacked Wamco for putting "its own interests above its clients" by keeping the truth from those clients "when the coding error was discovered." Phyllis Borzi, Assistant Secretary of Labor for the DoL's Employee Benefits Security Administration (EBSA), added that Wamco "violated its fiduciary duty to act solely in the best interest of its plan clients." (Some of the institutional clients affected were retirement plan sponsors, hence the DoL's involvement.) 

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