Another Win For Investors In Morgan Keegan Bonds Case
Memphis-based broker Morgan Keegan must pay an investor $2.5 million for losses tied to several Morgan Keegan bond funds that made bad bets on mortgage-related securities. A Financial Industry Regulatory Authority (FINRA) panel announced the award decision on Feb. 19.
The panel found Morgan Keegan liable for negligence, failure to supervise and selling unsuitable investments to Florida investor Andrew Stein and his two companies.
Morgan Keegan has been the subject of numerous arbitration claims and lawsuits over six bond funds that were heavily invested in risky collateralized debt obligations (CDOs) and other mortgage-related holdings. The funds plummeted in value - some by as much as 90% - following troubles in the housing market.
As reported Feb. 22 by the Wall Street Journal, Stein’s $2.5 million award is the largest to date ordered against Morgan Keegan.
Stein’s claim against Morgan Keegan contained many of the same allegations previously citied by investors. Specifically, Stein and his companies alleged that Morgan Keegan failed to disclose the magnitude of risks associated with the funds until it was too late. Stein also alleged that Morgan Keegan artificially inflated the value of the funds’ assets in order to give the appearance they were more stable.
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