SEC, Four States Charge Morgan Keegan Of Misleading Investors
On April 7, the Securities and Exchange Commission (SEC), four states and the Financial Industry Regulatory Authority (FINRA) joined together to charge Morgan Keegan & Co. Morgan Keegan Asset Management and several employees of misleading of investors about the risks of several Morgan Keegan bond funds. In its complaint, the SEC alleges that the Memphis-based broker, along with former portfolio manager James Kelsoe, used fictitious securities values to make losses in the funds appear much smaller than they actually were.
The states’ administrative action seeks to revoke the registrations of both Morgan Keegan and Morgan Keegan Asset Management, prohibiting the companies from selling securities in Kentucky, Mississippi, South Carolina and Alabama. Tennessee also joined the lawsuit on April 8.
All five states are seeking unspecified administrative penalties and restitution for investors.
The focus of both the administration action and the SEC’s complaint is on six proprietary bond funds that lost approximately $2 billion dollars from March 31, 2007, to March 31, 2008. State and federal regulators contend that Morgan Keegan marketed and sold the funds to investors as conservative investments when in actuality the products were heavily concentrated in risky mortgage-related securities.
Morgan Keegan has since sold the funds to Hyperion Brookfield Asset Management.
Today, Morgan Keegan faces a slew of investor lawsuits. As reported by April 8 by the Business Courier of Cincinnati, 81 cases have been heard to date, with claimants seeking a total of about $47.9 million in damages. In those cases, Morgan Keegan has paid a total of $8 million to claimants.
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