The DOL announced a settlement Jan. 27 with Western Asset Management, resolving a case in which the firm was alleged to have purchased securities for ERISA plans that were prohibited. The firm was also alleged to have engaged in prohibited cross-trading on other accounts. WAMCo will restore $17.4 million and pay a $3.6 million fine. The DOL’s EBSA worked in coordination with the SEC on the case.
WAMCo bought $90 million of mortgage backed securities between Jan. 31, 2007 and Jan. 12, 2009 that were prohibited for those plans and resulted in significant losses. The firm’s compliance system was overridden, and management did not correct the issue or inform clients when they became aware of the transaction, according to the DOL. In addition, WAMCo was alleged to have sold fixed income from some plans to broker dealers and then repurchased them at a higher price for others, resulting in prohibited cross-trading. WAMCo is a subsidiary of Legg Mason.
