Archive for the “Morgan Keegan Bond Funds” Category

Investors with losses in a group of ill-fated Morgan Keegan bonds emerged victorious recently in five out of six arbitration claims presented before the Financial Industry Regulatory Authority (FINRA). The decisions, which cover the months of May and June 2010, are related to a series of proprietary Morgan Keegan bond funds that made investments in speculative mortgage loans and toxic collateralized debt obligations (CDOs).

According to investors, Morgan Keegan marketed and represented the funds in question as safe investments that were suitable for low-risk investors. When the housing market crashed in 2007, however, the funds plummeted in value by as much as 80%. Investors meanwhile experienced enormous financial losses.

A slew of lawsuits and arbitration claims have been filed against Morgan Keegan, as well as against several of the company’s top executives. In the past year, evidence has continued to come forth to back up investors’ claims that the Memphis-based brokerage deliberately misled clients when it marketed and sold the bond funds.

Further affirmation came in April 2010 when the Securities and Exchange Commission, state regulators and FINRA charged Morgan Keegan and two employees - James Kelsoe and Joe Weller - with fraud for inflating the value of the risky securities held by the bond funds.

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.

Morgan Keegan & Co. has lost an attempt to vacate a $1.46 million arbitration award involving former NBA star Horace Grant. On June 25, Judge S. James Otera denied the Memphis-based broker’s claims that arbitrators were biased when they initially ruled in favor of Grant.

The award to Grant, which included $1.45 million in compensatory damages and $10,000 in costs, was announced in September by a Los Angeles arbitration panel of the Financial Industry Regulatory Authority (FINRA).

Grant is among hundreds of investors who have filed arbitration claims against Morgan Keegan and six proprietary bond funds that were heavily invested in collateralized debt obligations (CDOs) and other mortgage-related securities. The funds declined in value by as much as 95% following the housing bubble burst.

According to many investors, Morgan Keegan marketed the funds as conservative investments appropriate for retirees looking to protect their principal.

In trying to have Grant’s award dismissed, Morgan Keenan said that one member of the arbitration panel - attorney Jonathon Schwartz - failed to reveal his background as an expert in recovering losses from collateralized debt obligations. The judge in the case, however, disagreed.

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.

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.

Philip Aidikoff, a securities lawyer with Aidikoff, Uhl & Bakhtiari in Beverly Hills, Calif., called the arguments of alleged bias “absurd.”

“It’s not unusual for a person on one panel to be chosen to sit on another panel,” he says, especially in a situation that involves so many investor claims. About 700 claims are pending against Morgan Keegan. “There is a limited number of people in each geographic pool to be selected for arbitration panels,” Aidikoff said in the Wall Street Journal article.

Broker/dealer Morgan Keegan has been granted an administration hearing over allegations that the company cost investors more than $2 billion because of fraudulent and reckless business practices.

The hearing will take place Oct. 5 in Montgomery, Ala., at the offices of the Alabama Securities Commission.

The Securities Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and four states have charged Morgan Keegan with fraud and reckless business practices, accusing the company and several employees of overstating the value of several bond funds backed by risky mortgages and using false and misleading sales materials.

The two Morgan Keegan employees who are named in the charges by regulators are James Kelsoe and Joseph Weller. Weller heads Morgan Keegan’s accounting department.

The regulatory charges facing Morgan Keegan are in addition to hundreds of arbitration claims that have been filed by investors.

Our affiliation of securities 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.

Troubled investment bank Morgan Keegan has been granted an administration hearing regarding legal issues tied to a group of RMK bond funds and allegations that the products cost investors more than $2 billion in losses because of Morgan Keegan’s fraudulent and reckless business practices.

The hearing will take place Oct. 5 in Montgomery, Ala., at the offices of the Alabama Securities Commission.

Several states, including Mississippi, Alabama, Kentucky and South Carolina, as well as the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) filed administrative actions on April 7 against Morgan Keegan. The focus of their actions concerns allegations that Morgan Keegan and several high-ranking employees overstated the value of funds backed by subprime mortgages and used false and misleading sales materials to tout the funds to investors.

The federal and state charges are in addition to hundreds of arbitration claims that have been filed by investors against Morgan Keegan over losses in the bond funds. Class-action lawsuits also have been leveled against the company.

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.

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.

The Morgan Keegan fraud investigations may be creating concerns among current clients about the safety of their own accounts. In April, the Securities and Exchange Commission (SEC) filed a civil lawsuit against the Memphis-based broker, charging the company and top executives James Kelsoe and Thomas Weller of convincing staff members in Morgan Keegan’s accounting department of accepting 262 “price adjustments” in 2007 to hide the plummeting value of wrong-way bets on mortgage-backed securities and other risky investments.

The funds in question became such an impediment to Morgan Keegan that its asset management arm sold them in 2008 to Hyperion Brookfield Asset Management.

In addition to the SEC complaint, several states allege similar charges against Morgan Keegan. Meanwhile, thousands of investors have filed arbitration claims with the Financial Industry Regulatory Authority (FINRA) in an attempt to recoup their financial losses.

In a recent letter to clients, Morgan Keegan executive John Carson tried to assuage concerns about the ongoing state and federal investigations. As reported April 14 by the Wall Street Journal, the letter, in part, stated the following:

“First and foremost, I want to reassure you of the safety of your accounts held with Morgan Keegan. . . These charges, which relate to a mutual fund management business that was sold in 2008, should not be construed as claims against the business of the firm as a whole.”

Carson went on to tell investors that the charges being leveled against Morgan Keegan were civil charges, not criminal, and therefore entirely different from the criminal case involving Bernie Madoff.

For investors who’ve lost some $2 billion in their Morgan Keegan investments because of an alleged cover-up regarding the true state of the funds, those sentiments are of little comfort.

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Investors in Wiregrass, Alabama, are suing Morgan Keegan & Co. after losing about $13 million in the RMK funds. The 100 investors thought they were buying supposedly safe-as-CDs investments. Only later did they learn - as did thousands of investors throughout the country - that the funds were backed by risky mortgage-related securities and other toxic structured financial products. When the financial crisis hit, the funds plummeted in value.

State and federal regulators filed fraud charges against Morgan Keegan and several high ranking company executives earlier this week. Among the allegations: Morgan Keegan misled investors and brokers about the risks of the funds and misrepresented their value.

One investor who lost big to Morgan Keegan is Georgia Smith. As reported April 9 by the Dothan Eagle, the retired teacher moved her money from reliable municipal bonds into other securities on the recommendation of a Morgan Keegan representative. She ended up losing her entire investment.

“They just sold us junk bonds; that was all,” Smith said in the article.

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.

Morgan Keegan’s James Kelsoe is known as a Wall Street financial guru. Now the former portfolio manager of several collapsed Morgan Keegan bond funds (RMK Funds) is at the center of fraud allegations by state regulators and the Securities and Exchange Commission (SEC).

The SEC, state regulators and the Financial Industry Regulatory Authority (FINRA) coordinated their filing of charges against Kelsoe, Morgan Keegan and Morgan Asset Management on April 7, accusing all three of misleading investors about the risks associated with a group of Morgan Keegan bond funds. Kelsoe is accused of allegedly ordering Morgan Keegan’s accounting department to overstate the value of the funds, which were supported by risky mortgage-related securities.

Collectively, investors have lost $2 billion in six of the Morgan Keegan funds, which 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.

In addition to Kelsoe, the SEC is going after Morgan Keegan’s Joseph Thompson Weller. Weller, who was head of the Fund Accounting Department, is accused of “recklessly publishing” inaccurate information about the RMK funds and selling shares to investors based on the inflated prices.

“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, in an April 7 story in the Memphis Flyer.

As for Kelsoe, he was at one time known throughout Wall Street as an investing wizard. In 2002, he told Bloomberg that part of the secret to his financial prowess was being able to properly value mortgage-backed bonds. Now, he’s being charged with falsifying the values of those mortgage-backed bonds.

“This scheme had two architects - a portfolio manager responsible for lies to investors about the true value of the assets in his funds, and a head of fund accounting who turned a blind eye to the fund’s bogus valuation process,” said Robert Khuzami, the SEC’s director of enforcement, in a statement.

All of the allegations leveled on April 7 are civil matters, not criminal.

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.