Articles Posted in Morgan Keegan Bond Funds

Below is the Regions press release related to regulatory order for it to pay $200 million due to its actions related to the Morgan Keegan bond funds. Strangely, it announced also that it retained Goldman to explore selling Morgan Keegan. Regions has been extremely aggressive in defending the scores of arbitration claims filed by aggrieved investors of the Morgan Keegan bond funds, even consistently challenging in court arbitration awards it’s lost. A big issue going forward for our clients and other investors with pending arbitrations is how will the restitution fund, the SEC Order, the FINRA AWC and the potential sale of Morgan Keegan effect the cases.

Morgan Keegan Settles Regulatory Issues with SEC, FINRA, and State Regulators Regarding Former Fund Management Business; Regions to Explore Strategic Alternatives for Morgan Keegan

BIRMINGHAM, Ala., Jun 22, 2011 (BUSINESS WIRE) — Regions Financial Corp. (NYSE:RF) announced today that its brokerage and investment banking subsidiary, Morgan Keegan & Company, Inc., and its asset management subsidiary, Morgan Asset Management, have agreed to a settlement of previously disclosed regulatory matters with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and a group of state securities regulators with respect to issues concerning certain mutual funds and closed-end funds (the RMK Funds), a business that Morgan Asset Management divested in 2008.

Below is FINRA’s press release of the $200M restitution order the SEC and FINRA levied on Regions Morgan Keegan (RMK) related to bond funds it misrepresented to investors. Big for investors. We had blogged about this in April 2010 when the SEC charged Morgan Keegan & Company, Morgan Asset Management and two employees with fraudulently overstating the value of securities backed by subprime mortgages. These were the first federal government allegations related to the Regions Morgan Keegan bond 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. Big fight will be to get fines into evidence during the pending arbitrations.

Morgan Keegan Ordered to Pay $200 Million to Investors to Settle Allegations Regarding Sales of Bond Funds Sales Materials Made Exaggerated Claims and Failed to Disclose Risks; Supervisory System Failures

WASHINGTON – The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) and five state regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee announced today that each has settled enforcement proceedings against Morgan Keegan & Company, Inc. Morgan Keegan will pay restitution of $200 million for customers who invested in seven affiliated bond funds, including the Regions Morgan Keegan Select Intermediate Bond Fund (Intermediate Fund). Morgan Keegan’s affiliate, Morgan Asset Management, managed the funds.

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.
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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.

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.

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%.