Jan. 27 (Bloomberg) — Western Asset Management Co., a unit of Legg Mason Inc., will pay more than $21 million to settle charges of defrauding clients, the U.S. Securities and Exchange Commission said.

Western Asset, based in Pasadena, California, concealed investor losses that resulted from a coding error and engaged in cross trading of mortgage-backed securities that favored some clients over others, the SEC said in a statement today.

The money manager breached its fiduciary duty by failing to disclose and promptly correct an error that resulted in about 100 clients allocating money to a private investment that was prohibited by their retirement plans, the SEC said. Western Asset should have reimbursed its clients for the losses on the investment, which had fallen in value, instead of failing to notify clients until two years later, after it had liquidated the investment from their accounts.