Morgan Keegan Lawsuits A Growing Black Mark For Regions Financial
Memphis-based Morgan Keegan & Co., the brokerage arm of Regions Financial Corp., is discovering the best-laid plans can indeed have dire - and expensive - consequences. In 2002, Morgan Keegan enthusiastically unveiled a group of high-yield bond funds filled with unconventional and untested structured finance products, including large concentrations of mortgage-backed securities. Today, Morgan Keegan and those bond funds are mired in lawsuits, with six cases costing the company more than $1.6 million in just the past two months.
For awhile, the RMK funds, which included the Select Intermediate Bond Fund and the Select High Income Fund, outperformed their peers. Then, in 2007, the subprime mortgage crisis took center stage and a dark cloud suddenly was cast over the future performance of the funds. In late 2006, the funds’ assets were $1.6 billion; by the end of June 2008, the figure had shrunk to $52 million.
As reported May 1 by the Birmingham Business Journal, investors in the RMK funds cried foul, contending the “safe” investments that Morgan Keegan had sold them essentially were now worthless. Hundreds of arbitration claims against Morgan Keegan soon followed, along with several class-action lawsuits.
Morgan Keegan’s bonds were fat with some of the “worst pieces of structured finance deals,” on the market, said securities expert Craig McCann of Virginia-based Securities Litigation & Consulting Group in the Birmingham Business Journal article.
New information regarding the risk factors of the bond funds and what Morgan Keegan did and did not reveal to investors, including the funds’ classification as investments similar to corporate bonds and preferred stocks when in fact they were high-risk derivatives, ultimately has helped investors prove their cases. Since early March, six different investors have rendered significant awards from FINRA arbitration panels. In one case, an investor won $950,000.
The bottom line: There seems to be a new trend shadowing the arbitration claims against Morgan Keegan and its bond funds, one in which more investors are coming out on top because the evidence speaks for itself.
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.
