Securities Fraud Attorney Blog

Today, the SEC charged Morgan Keegan & Company, Morgan Asset Management and two employees with fraudulently overstating the value of securities backed by subprime mortgages. These are the first federal government allegations related to the Regions Morgan Keegan bond funds which lost significant value in 2008. The serious charges come on the heels of a string of recent FINRA arbitration multi-million dollar awards against Morgan Keegan related to the 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. Kelsoe was charged by the SEC. Many law firms around the U.S., including our firm, have been retained by investors who lost money in the Regions Morgan Keegan funds.

It will be interesting to see how the SEC allegations effect the firms’ litigation strategy of trying most of the arbitration claims to award. Here is the text of the SEC release.

Continue reading "SEC Charges Morgan Keegan with Fraud Related to Bond Funds" »

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.

Morgan Keegan, a division of Regions Financial Group, lost yet another FINRA arbitration related to its Bond Funds. The case is allegedly the first successful arbitration on behalf of an investor who was not direct customer of Morgan Keegan. According the law firm who won the arbitration, the elderly investor was awarded complete damages, including interest and fees.

Morgan Keegan has now lost many FINRA arbitrations in the last six months related to the Regions Morgan Keegan funds which lost significant value in 2008. Many law firms around the U.S., including our firm, have been retained by investors who lost money in the Regions Morgan Keegan funds.

The funds were run by Jim Kelsoe, the chief-fixed income investment officer of the Memphis-based brokerage's Morgan Asset Management. The seven mutual funds include four Regions Morgan Keegan closed-end funds: Advantage Income Fund, High Income Fund, Multi-Sector High Income Fund and Strategic Income Fund; and three open-end funds: Regions Morgan Keegan Select Short Term Bond Fund, Intermediate Bond Fund and High Income Fund.

Morgan Keegan represented the Regions Morgan Keegan funds as low-risk bond funds. They turned out to be highly concentrated in subprime mortgage-backed securities and CDO's. The losses are astounding. For example, The Select High Income lost 75% through February 28, 2008 and the Select Intermediate Bond lost 84%.

It will be interesting to see if Morgan Keegan attempts to resolve some of the over 100 pending arbitrations now that they are consistently getting hammered.

Regions Morgan Keegan lost its biggest arbitration award to date related to its mutual funds which imploded during the subprime crisis. Former NBA ballplayer Horace Grant won an almost $1.5 million arbitration award against Morgan Keegan & Co. for losses in the bond mutual funds. The Los Angeles based Finra panel awarded Mr. Grant almost all of his losses in the case. It was a very impressive victory considering how difficult it is to win arbitrations on behalf of athletes or celebrities. Regions Morgan Keegan faces hundreds of arbitration claims filed by investors (including some represented by our firm) who allege that the funds were fraudulently marketed as conservative. After winning the first few rounds of cases, investors' attorneys have started to routinely defeat the bank.

Morgan Keegan, whose bond funds imploded in spectacular fashion in 2008, disclosed that it received a Wells Notice from the SEC on July 7, 2009. A Wells Notice is notification that the SEC staff intends to recommend that it bring an enforcement action for possible violations of federal securities laws. The bond funds at issue were run by James Kelsoe, a portfolio manager at Region Morgan Keegan's asset management arm. There are approximately over one hundred pending arbitration matters against Morgan Keegan related to the bond funds. Our firm presently represents investors from around the country who unfortunately invested in the funds. It will be interesting to see how the post-Madoff SEC handles the investigation and how it may potentially affect the pending arbitration proceedings.

Morgan Keegan has lost six FINRA arbitrations in the last two months related to the Regions Morgan Keegan funds which lost significant value in 2008. One of the recent awards included punitive damages. Many law firms around the U.S., including our firm, have been retained by investors who lost money in the Regions Morgan Keegan funds.

The funds were run by Jim Kelsoe, the chief-fixed income investment officer of the Memphis-based brokerage's Morgan Asset Management. The seven mutual funds include four Regions Morgan Keegan closed-end funds: Advantage Income Fund, High Income Fund, Multi-Sector High Income Fund and Strategic Income Fund; and three open-end funds: Regions Morgan Keegan Select Short Term Bond Fund, Intermediate Bond Fund and High Income Fund.

Morgan Keegan represented the Regions Morgan Keegan funds as low-risk bond funds. They turned out to be highly concentrated in subprime mortgage-backed securities and collateralized debt obligations (CDO’s). The losses are astounding. For example, The Select High Income lost 75% through February 28, 2008 and the Select Intermediate Bond lost 84%.

The recent run of arbitration victories bodes well for other investors who are either awaiting their hearing dates or have not yet filed an arbitration.