The professional career of Morgan Keegan’s James Kelsoe has come full circle. Kelsoe, known for his savvy Wall Street acumen, was sued by the Securities and Exchange Commission (SEC) on April 7 on allegations that he and several other Morgan Keegan execs recklessly published inaccurate information about a group of Morgan Keegan bond funds and then sold shares to investors based on the inflated prices.
The suit also names Morgan Keegan itself, as well as Joseph Thompson Weller, who heads Morgan Keegan’s Fund Accounting Department.
“This misconduct masked from investors the true impact of the subprime mortgage meltdown on these funds,” said William Hicks, associate director in the SEC’s Atlanta Regional Office.
The Financial Industry Regulatory Authority (FINRA) also is after Kelsoe and Morgan Keegan. Specifically, FINRA’s allegations focus on misleading sales materials, deficient internal guidance and the firm’s failure to train its brokers about the risks of the funds being sold to investors. Ultimately these actions led Morgan Keegan’s brokers to make material misrepresentations to investors, FINRA says.
Kelsoe, the former portfolio manager of the funds in question, is at the center of a multistate administrative action, too. Regulatory authorities in Tennessee, Alabama, Kentucky, Mississippi, and South Carolina have announced their intent to try and revoke the registration of Morgan Keegan and impose penalties for violating securities laws.
Hundreds of investors have cited Kelsoe in their lawsuits and arbitration claims, accusing both Kelsoe and Morgan Keegan of hiding certain risks and other information about their investments, as well as presenting the funds as “conservative” when, in fact, they were not.
Hyperion Brookfield Asset Management now manages the Morgan Keegan funds that are at the center of the state and federal probes.
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.