NEW YORK: Fixed income manager Western Asset Management, a unit of investment manager Franklin Templeton or Franklin Resources, said on Wednesday it had replaced a top investment executive and would shutter a $2 billion fund amid federal investigations into his conduct.

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

The company will also shutter the $2 billion Macro Opportunities strategy fund following Leech's departure. Western Asset Management says it is cooperating with "parallel government investigations" after the opening of an internal investigation concerning past trade allocations involving Treasury derivatives in some Western Asset Management accounts. Franklin Templeton's shares finished down more than 12% at $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 accounts, or "cherry-picking."

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

"We are confident 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," Western Asset Management President and CEO Jim Hirschmann said in the statement. (Reporting by Chibuike Oguh in New York and Douglas Gillison n Washington; Editing by Lisa Shumaker)