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October 6, 2010

Morgan Keegan to Pay $9.2M to Investors in Texas Securities Fraud Case Involving Risky Bond Funds

In a Texas securities case, FINRA arbitration panel has ordered Morgan Keegan & Co., a Regions Financial Corp., to pay 18 investors $9.2M for losses related to risky bond funds. The investors contend that the investment firm committed securities fraud when it convinced them to invest in certain funds that included high-risk “subprime” mortgage assets. Clients also claimed that they were persuaded to automatically reinvest dividends in the funds.

This is the biggest award that an arbitration panel has awarded in a Morgan Keegan case involving six bond funds that were heavily involved in mortgage-related holdings. The funds dropped in value significantly in 2007 and 2008. Hundreds of securities claims against the brokerage firm followed. Last July, Regions Financial announced that Morgan Keegan had recorded a $200M charge for probable costs of the bond fund lawsuits.

Arbitrators in Houston made the ruling in the Texas securities case. Included in the total sum was $1.1M in legal fees that, per state law, will be paid to investors. All of the investors involved were clients of Russell W. Stein, a Morgan Keegan broker. Stein is no longer with the broker-dealer. Regulatory filings indicate that he is currently employed with Raymond James Financial Inc. unit Raymond James & Associates Inc.

Stein and his wife were original claimants in this Texas securities fraud case. They too had invested in the bond funds. Their claims are now part of another case involving a group of other investors. Morgan Keegan is considering appealing the FINRA arbitration panel’s decision.

Related Web Resources:
Morgan Keegan to pay bond fund investors $9.2 mln, Reuters, October 6, 2010

Morgan Keegan Must Pay $9.2Mln To Investors - Panel, Wall Street Journal, October 6, 2010

Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses, Stockbroker Fraud Blog, February 23, 2010

Morgan Keegan Again Ordered by Arbitrators to Pay Bond Fund Losses to Investors, Stockbroker Fraud Blog, October 27, 2009

Financial Industry Regulatory Authority

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Posted In: Bond Funds , Financial Firms , Morgan Keegan , Regions Financial Corporation , Subprime Mortgage , Texas Securities Fraud

February 23, 2010

Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses

A Financial Industry Regulatory Authority panel has ordered Morgan Keegan & Co. to pay investor Andrew Stein $2.5 million because the bond funds that he invested in had bet poorly on mortgage-related holdings. Panel members found Morgan Keegan liable for failure to supervise, negligence, and for selling investments that were unsuitable for Stein and his companies. The claimants, who sustained financial losses, had initially sought $12 million.

Stein’s arbitration claim is just one of over 400 securities claims that have been filed against Morgan Keegan over its bond funds that had invested in subprime-related securities, such as CDO’s (collateralized debt obligations). When the US housing market collapsed, the funds went down in value by up to 82%.

Stein contends that Morgan Keegan did not reveal the kinds of risks involved in investing in the bond funds. He and his companies claim that Morgan Keegan artificially increased the fund assets’ value so that the funds would appear more stable and investors wouldn’t be able to see the actual risks involved.

At least 80 of the securities cases have been heard, and claimants have so far been awarded $10.1 million. Morgan Keegan says that while it has settled a number of securities claims over the bond funds, claimants have dropped 114 other cases.

Stein and his two companies are pursuing a securities claim against Regions Financial and Morgan Asset Management, Inc. They are claiming fraudulent pricing and valuation of funds.

Our securities fraud law firm represents clients that sustained financial losses as a result of investing in Morgan Keegan bond funds. Please contact us for your free case evaluation.

Related Web Resources:
Morgan Keegan Must Pay Investor, Wall Street Journal, February 22, 2010

FINRA

Posted by Shepherd Smith Edwards & Kantas LTD LLP | Permalink | Email This Post

Posted In: Arbitration , Bond Funds , FINRA , Financial Firms , Morgan Keegan , Regions Financial Corporation , Securities Fraud

January 11, 2010

Schwab YieldPlus and Morgan Keegan RMK Funds Among Worst Mutual Fund Disasters of the Last Decade, According to US News & World Report

US News and World Report says that the first decade of the 21st Century for fund investors got worse after the dotcom bubble burst in 2000. The media publication picked its 10 worst fund disasters:

Reserve Primary Fund: Investors scrambled to cash in shares after the fund’s price sank to over $1/share on September 16, 2008. According to US News & World Report, the Reserve Primary Fund’s biggest mistake was relying too much on Lehman Brothers, which left the fund with $785 million in worthless bonds when Lehman collapsed. Meantime, other funds found themselves in trouble as panic spread. Three days later, the federal government said it would temporarily insure money market funds.

Market timing scandal of 2003: Funds were accused of illegal late trading and front running that showered favor on more influential investors—leaving ordinary retail investors in a state of mistrust toward the institutions they had turned to for securing their retirement savings. Bank of America, Janus, Putnam, and PBHG were just a few of the financial firms accused of market timing, though the practice appeared to have permeated the entire fund industry to some extent.

Merrill Lynch Internet Strategies Fund: Merrill Lynch launched this fund the same month the dot-com bubble burst in 2000. The fund lost 70% in just over a year. The Merrill Lynch Internet Strategies Fund was just one of a number of funds that had to shut down following the crash.

Chicken Little Growth Fund: Allegations of investor fraud and poor performance led to this fund shutting down after just 16 months.

Congressional inaction: Lawmakers made US News & World Report’s list for both overlooking the Generate Retirement Ownership Through Long-Term Holding Act for nearly 10 years and neglecting to send through the Arbitration Fairness Act.

Schwab YieldPlus Funds: This ultrashort bond fund lost 35.4% in 2008. Promoted as a money market fund alternative, the losses are attributed to high-risk mortgage-backed securities that “imploded.”

TCW’s firing of Jeffrey Gundlach: Fearful he would walk out the door and take a significant portion of the team with him, TCW fired him. At least 40 employees followed Gundlach. TCW’s Total Return Bond Fund has experienced an outflow of billions of dollars.

Direxion Monthly Emerging Markets Bear 2x: Sustained 58% losses each year for the last three years. The highly leveraged fund that concentrates in emerging markets leaves plenty of room for tracking errors unless sales and purchases are made at the exact right moments.

Morgan Keegan RMK Funds: High-risk mortgage backed securities led to these funds sustaining massive losses. Morgan Keegan RMK funds lost $2 billion the year beginning March 31, 2007. Investors are lined up with their arbitration filings.

Janus: The company’s Global Technology Fund lost 84% in the 2000-2002 bear market. Janus was involved in market-timing debacle of 2003. It also lost big and damaged its reputation from holding 41 million Enron shares.

Our stockbroker fraud law firm represents investors throughout the US that have sustained financial harm because of these fund disasters.

Related Web Resources:
The Decade's 10 Worst Fund Disasters, US News & World Report/Yahoo News, December 30, 2009

SEC Takes Steps to Address Late Trading, Market Timing and Related Abuses, Securities and Exchange Commission, December 3, 2003

Why the Burst Internet Bubble Didn't Break the Economy, Business Week, July 21, 2000

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Posted In: Bond Funds

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