What was once a Wall Street success story is now a company caught up in scandal. Investment firm Regions Morgan Keegan has been accused of using deceptive marketing practices to pass off risky subprime mortgage-backed mutual funds to clients - funds that have now tanked in value.
Investors, who say they were blindsided by Morgan Keegan, are responding in their own way: with lawsuits - and plenty of them.
Reportedly, an average of two lawsuits has been filed against Morgan Keegan every month (excluding January) for the past five months. And apparently thatâ€™s gotten the attention of management. Pending shareholder approval, directors of seven RMK funds have signed an agreement removing them and the funds’ director from managing the funds. The funds would then be transferred to Hyperion Brookfield Asset Management of New York.
Shareholders will vote on the transfer agreement on July 11.
The developments involving Morgan Keegan are disturbing on many levels. If allegations of misrepresentation prove to be true, the bonds of trust between RMK and its clients may be damaged beyond repair. At the very least, it is a signal to all investors to take a long, hard look at their portfolio. If you have invested in an RMK mutual fund and sustained significant losses, we encourage you to contact us so we can evaluate the facts and circumstances of how those investments were presented to you and whether they were appropriate in the first place.
The seven mutual funds in question include four Regions Morgan Keegan closed-end funds: Advantage Income Fund, High Income Fund, Multi-Sector High Income Fund and Strategic Income Fund. The other funds include three open-end funds: Regions Morgan Keegan Select Short Term Bond Fund, Intermediate Bond Fund and High Income Fund.
Itâ€™s unclear how the changing of the guard will affect the nine pending federal lawsuits.Since its founding in 1969 by Morgan and James Keegan, Morgan Keegan has been heralded as a Memphis success story. In 1970, the company purchased a seat on the New York Stock Exchange. In 1983, Morgan Keegan became a public company. And in 2001, the company was acquired by Birmingham-based Regions Financial.
The mutual fund meltdown that has since followed Morgan Keegan is becoming a familiar reality these days. On the advice of their broker, investors say they turned to RMK mutual funds as a â€œstableâ€ type of investment. What investors didnâ€™t know - and what they say Morgan Keegan failed to convey - was the critical fact that the funds had ties to investments in subprime mortgage-related assets and corporate junk bonds.
When the subprime mortgage crash hit, these investments took substantial losses - some losing more than 75 percent of their value. As for investors, many saw their retirement savings, money for childrenâ€™s college education and life-long nest egg vanish almost overnight.
Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.Â