Franklin Templeton unit replaces investment chief, closes $2bn fund amid US probes

NEW YORK (Reuters) – Fixed income manager Western Asset Management, a unit of investment manager Franklin Templeton or Franklin Resources, said on Wednesday it has replaced a top investment executive and will close a $2 billion fund on the background of federal investigations into his conduct.

Michael Buchanan has been named chief investment officer effective immediately, replacing Ken Leech, who is on leave after being notified by the U.S. Securities and Exchange Commission that civil charges against him are likely, according to an announcement.

The firm will also close its $2 billion Macro Opportunities strategy fund after Leech’s departure.

Western Asset Management says it is cooperating with “parallel government investigations” after the opening of an internal investigation into past trade allocations involving treasury derivatives in some Western Asset Management accounts.

Shares of Franklin Templeton fell more than 12 percent to $19.78, the biggest daily percentage drop in nearly four years.

Bloomberg reported Wednesday that federal prosecutors in the Southern District of New York are also investigating the alleged allocation of winning trades to favored, or “cherry-picking,” accounts.

Representatives for Franklin Templeton and the Southern District did not immediately respond to requests for comment. An SEC spokesman declined to comment.

“We are confident that Mike’s leadership, extensive experience and deep commitment to Western Asset will ensure not only a seamless transition, but also that our clients and our team are in good hands,” said Western Asset Management President and CEO , Jim Hirschmann, in statement. .

(Reporting by Chibuike Oguh in New York and Douglas Gillison in Washington; Editing by Lisa Shumaker)