A California-based subsidiary of Legg Mason will pay more than $21 million to the US government to settle two cases that accuse the firm of concealing investor losses caused by improper investments and making trades that favored some clients over others.

A California-based subsidiary of Legg Mason will pay more than $21 million to the US government to settle two cases that accuse the firm of concealing investor losses caused by improper investments and making trades that favored some clients over others.

The Securities and Exchange Commission and the US department of Labor said in a joint statement that Western Asset Management Company must pay $17.4 million to harmed clients and $3.6 million in penalties.

According to the regulators, Western Asset failed to disclose and promptly correct a coding error that caused the improper allocation of a restricted private investment to the accounts of nearly 100 clients that then plummeted in value.

“When the coding error was discovered, Western Asset put its own interests above its clients and avoided telling investors what had caused losses in their accounts. By concealing the error, Western Asset avoided reimbursing clients for their losses,” said Michele Wein Layne, director of the SEC’s Los Angeles, CA, regional office.

In a separate order involving a different set of client accounts, the SEC found that Western Asset engaged in a type of illegal cross-trading - the practice of moving a security from one client account to another without exposing the transaction to the market.

The regulators said that, because Western Asset arranged to cross these securities at the bid price rather than a price representing an average, the firm improperly allocated the full benefit of the market savings on the trades to buying clients and cost the selling clients approximately $6.2 million.