Matt Levine, Columnist

SEC Accuses Legg Mason of Some Accidental Fraud

This is pretty much the most boring securities fraud ever, so, you are warned.

January 27, 2014 at 11:26 PM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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"SEC Charges Legg Mason Affiliate With Defrauding Clients" is a pretty juicy headline as these things go. Legg Mason is a big deal and the affiliate, Western Asset Management Company, is a big deal all on its own, with $442.7 billion in assets under management. And they agreed to a $21 million settlement, which is like nine hours' worth of JPMorgan settlements, so that's pretty big I guess.

But the alleged fraud was ... oh is it boring. Actually there were two alleged frauds. (Both boring!) The first one, which cost Legg Mason more than $10 million, is literally that employees hit the wrong button in their compliance database. In January 2007, Wamco bought for its clients $50 million worth of Glen Meadow, "a $500 million private placement that was designed to provide subordinated debt financing to the Hartford Insurance Group." The offering memorandum said that the securities could not be sold to Employee Retirement Income Security Act benefits plans, because there are rules about what sorts of things Erisa benefits plans can own, but those rules are too boring to discuss in polite company.1 Then this happened: