Securities Fraud Attorney Blog

Morgan Keegan lost two large FINRA arbitrations this week related to the Regions Morgan Keegan bond funds which were decimated in 2008. These awards are the second and third reported awards of over $1 million.

A securities arbitration panel ordered brokerage firm Morgan Keegan & Co. to pay Andrew Stein, a 38-year-old investor in Jupiter, Fla., and his two companies, $2.5 million for losses. Morgan Keegan was found liable for negligence, failure to supervise and selling unsuitable investments.

Another FINRA arbitration panel in Birmingham, Alabama ordered Morgan Keegan to pay over $1.1 million which according to counsel on the case represented 80% of the $1.4 million net losses in the RMK funds.

Morgan Keegan is the subject of numerous arbitration cases relating to over $2 billion of losses in RMK proprietary bond mutual funds managed by James Kelsoe and decimated due to allegedly risky investments. Many law firms around the U.S., including our firm, have been retained by investors who lost money in the Regions Morgan Keegan funds.

These two cases are important due to the size of the recoveries. Many of the Morgan Keegan bond fund cases involve losses of under $100,000. Now, the larger cases on behalf of wealthier investors are funneling through the arbitration system. Awards greater than $1 million are very impressive in this context.

A former president of a Memphis gas company won a $51,000 arbitration award against Morgan Keegan & Co. related to the Morgan Keegan bond funds. It was approximately 64% of the investor’s out of pocket losses. This is just another in a string of victories by public customers against Morgan Keegan related to the funds.

According to news reports, the statement of claim alleged that the funds were not managed conservatively and that Morgan Keegan misrepresented their volatility. Jim Kelsoe, the funds manager allegedly made numerous representations to the investor that the RMK funds were safe.

Morgan Keegan received a Wells notice in July from the SEC and the tide has seemingly changed in the arbitration forum. Our firm represent investors with RMK claims. According to a Morgan Keegan spokesman, despite the loss, Morgan Keegan will continue a vigorous defense of all claims. We shall see.