A C-suiter and bond king is out, for now, as regulators and his own colleagues investigate the 9-office, 643-employee, $381.1-billion-AUM (as of June 30) fixed income firm near Los Angeles that he helped lead for decades.

On Wednesday, Jim Hirschmann, president and CEO of Pasadena, California-based Western Asset Management Company (a subsidiary of publicly traded Franklin Resources, dba Franklin Templeton [profile]), revealed that co-chief investment officer Mike Buchanan has been promoted to sole CIO. Buchanan's fellow co-CIO, Ken Leech, is now on a leave of absence, to focus on a Wells Notice that he recently received from the U.S. Securities and Exchange Commission (SEC)

The leadership change comes less than a month after Franklin issued its latest form 10-Q (for the quarter ended on June 30) on July 26. In note 11 of that report, the Franklin team briefly revealed the possibility of trouble brewing at Western Asset. The warning reads as follows:

Following the launch of an internal investigation focusing on certain past trade allocations of treasury derivatives in select Western Asset Managemnt ("WAM") managed accounts, WAM received notification of parallel investigations by the SEC and U.S. Department of Justice. The Company is cooperating with the investigation.

The Company is from time to time involved in other litigation relating to claims arising in the normal course of business. Management is of the opinion that the ultimate resolution of such claims will not materially affect the Company's business, financial position, results of operations or liquidity.

Now, with the CIO change, the Western Asset team reiterates that they "launched an internal investigation into certain past trade allocations involving treasury derivatives in select Western Asset-managed accounts" and that they are "coorperating with parallel government investigations." The Western Asset team also reveals the SEC recently sent Leech a Wells Notice.

"The Company will take action as warranted based on any findings after the conclusion of its investigation," the Western Asset team writes. "In light of Mr. Leech's leave of absence, the Company has determined that closing its Macro Opportunitiees strategy (approximately $2.0 billion in AUM as of 7/31/2024) is in clients' best interests."

Morningstar analyst Max Curtin reports that the investigations started almost a year ago, in October 2023, and that they're specifically focusing on Leech's trades from between 2021 and 2023. Bloomberg's Silla Brush and Sabrina Willmer report that the investigation covers about 17,000 trades.

Leech has spent more than three decades at the fixed income giant. He joined the firm in 1990, and he has served as CIO from 1998 to 2008 and then again as CIO or co-CIO from 2013 to 2024. He has received multiple M* manager of the year awards. Earlier in his career, he worked at Greenwich Capital Markets and Credit Suisse First Boston. He is a triple alumnus of the University of Pennsylvania's Wharton School.

Buchanan joined Western Asset in 2005 after leading U.S. credit products at Credit Suisse and PM roles with BlackRock and Conseco Capital Management. At Western Asset, he rose to co-CIO alongside Leech back in September 2023. He attended Brown University. 

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