Archive for June, 2010

Morgan Keegan is back in the news - this time over an arbitration case with a former employee. On June 30, the Wall Street Journal reported that a Financial Industry Regulatory Authority (FINRA) arbitration panel ordered a former Morgan Keegan broker to pay back some of his signing bonus to Morgan Keegan. In an unusual move, however, FINRA also demanded that Morgan Keegan compensate the broker.

According to the article, Paul Kotos was ordered to pay Morgan Keegan about $350,000, plus the firm’s attorney’s fees, from a signing bonus he received when he joined the Memphis-based brokerage two years ago. In Kotos’ counterclaim, the FINRA arbitration panel ordered Morgan Keegan to pay him $200,000.

According to Kotos, Morgan Keegan defamed him with a statement on his Central Registration Depository, or CRD, Form U5. A U5 provides information on the reasons for a broker leaving a firm.

In making the award, FINRA stated that “the procedure deployed by [Morgan Keegan] in the termination of [Kotos] fell significantly short of industry standards.”

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.

Investment firm Morgan Keegan must pay more than $200,000 to an investor after a state court denied a request by the broker to overturn a decision by a Financial Industry Regulatory Authority (FINRA) arbitration panel.

Judge Nicole Gordon Still affirmed a $220,000 award in favor of United Prison Ministries International and its claim against Morgan Keegan over a group of bond funds that suffered massive losses in 2007 and 2008.

Collectively, investors have lost $2 billion in six of the Morgan Keegan funds in question. The funds include Regions Morgan Keegan Select High Income, RMK High Income Fund, RMK Strategic Income Fund, Regions Morgan Keegan Select Intermediate Bond Fund, RMK Multi-Sector High Income and RMK Advantage Income Fund.

As reported June 10 by the Wall Street Journal, Morgan Keegan, a unit of Birmingham-based Regions Financial Corp. (RF), filed an appeal to overturn the initial award to United Prison Ministries in June 2009. At the time, the brokerage argued that the panel’s chairwoman, who previously sat on another FINRA arbitration panel that ruled against Morgan Keegan, should have been recused, according to court documents.

Judge Nicole Gordon Still, however, disagreed.

“The mere fact that she has served on arbitration panels of Morgan Keegan, and has ruled against Morgan Keegan in the past, is not enough to establish bias or prejudice,” the judge wrote in an opinion.

More institutional investors are coming out on top in their cases involving auction-rate securities. Last month, a Financial Industry Regulatory Authority (FINRA) arbitration panel awarded $9.8 million to Catalyst Health Solutions in its auction-rate securities case against Credit Suisse Securities.

Catalyst Heath Solutions, which manages prescription drug benefits, is just one of many institutional investors to take legal action against Credit Suisse after the ARS market came to an abrupt standstill in February 2008. Following the market’s collapse, institutional and retail investors alike were left financially hammered, unable to liquidate their supposedly liquid investments.

Ultimately, regulatory settlements were reached with a number of broker/dealers that marketed and sold auction-rate securities to investors. Most of the agreements, however, benefited retail ARS holders, not institutional investors.

In 2009, another institutional investor, STMicroelectronics NV, also successfully won its case against Credit Suisse when a FINRA arbitration panel ordered the brokerage to pay STMicroelectronics NV more than $406 million to settle claims that it misled the semiconductor maker into buying auction-rate securities.

On May 27, 2010, FINRA again ruled in favor of an investor’s arbitration claim against Credit Suisse. This time, the panel found Credit Suisse liable to Luby’s Inc. Specifically, FINRA ordered Credit Suisse to buy back the auction-rate securities at par and to pay interest on them at the par purchase price of 6% per annum from and including May 29, 2010, through and including the date the award is paid in full.

According to Luby’s Feb. 10, 2010, quarterly filing, the company held $7.1 million par value or $5.2 million fair value in auction-rate securities.

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.

A Financial Industry Regulatory Authority arbitration panel has ordered Credit Suisse Securities to pay an institutional investor - Catalyst Health Solutions - $9.8 million in a case tied to auction-rate securities backed by student loans.

Credit Suisse Securities is the U.S. broker/dealer unit of Credit Suisse Group. Catalyst Health Solutions is a Rockville, Md., company that manages prescription drug benefits. Catalyst filed its case last year, accusing Credit Suisse of fraud, negligence and selling unsuitable investments.

For the past two years, retail and institutional investors have been waging legal wars against Wall Street over auction-rate securities. The problems began in February 2008 when the $330 billion ARS market abruptly came to a standstill, leaving investors who thought their money was as liquid and safe as cash in severe financial straits.

Following investigations by state and federal regulators, a number of Wall Street firms agreed to buy back ARS holdings from retail clients. The majority of institutional investors, however, were left of the equation.

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.