Articles Posted in Regions Financial Corporation

A Financial Industry Regulatory Authority arbitration panel is ordering Morgan Keegan to pay a group of investors $881,000 for losses they sustained in Morgan Keegan’s proprietary funds that were concentrated in high-risk subprime mortgage assets. Customers lost about $2 billion.

The Morgan Keegan funds that investors had placed their money in included the:
• RMK High Income Fund
• RMK Multi-Sector High Income Fund
• RMK Advantage Income Fund
• RMK Select Intermediate Bond Fund
• RMK Strategic Income Fund

The claimants alleged misrepresentations and omissions, unsuitable investments, breach of fiduciary duty, failure to supervise, negligence, vicarious liability, breach of contract, FINRA rule violations, and Securities and Exchange Act violations. The FINRA panel found Morgan Keegan liable to the claimants on a number of the claims and ordered the financial firm to pay the following in compensatory damages:

• $33,382 to Palmer and Kathy Albertine • $105,844 to Jon Albright • $254,642 to Susan and Sam Davis • $458,625 to Kendall and Peter Tashie
FINRA also ordered Morgan Keegan to pay $26,850 for all of the forum fees for the arbitration against the financial firm, $28,500 for the Claimaints’ expert witness fee, and $600 for the portion of the filing fee that is non-refundable. Morgan Keegan is a Regions Financial Corporation subsidiary.

Related Web Resources:
FINRA Rules

Securities and Exchange Act of 1934, Cornell University Law School
More Blog Posts:
Morgan Keegan & Co. Inc. Must Pay $250K to Couple that Lost Investments in Hedge Fund with Ties to Bernard L. Madoff Investment Securities, Stockbroker Fraud Blog, March 16, 2011
Morgan Keegan to Pay $9.2M to Investors in Texas Securities Fraud Case Involving Risky Bond Funds, Stockbroker Fraud Blog, October 6, 2010
Morgan Keegan & Co., Inc., Morgan Asset Management, and Two Employees Face Subprime Mortgage Securities Fraud Charges by SEC, Stockbroker Fraud Blog, April 8, 2010 Continue reading

Financial Industry Regulatory Authority says that Morgan Keegan & Co, Inc. must pay over $250,000 in punitive and compensatory damages to Jeffrey and Marisel Lieberman. The couple suffered financial losses after investing in Greenwich Sentry LLP, a hedge fund whose assets were funneled to Bernard L. Madoff Investment Securities. FINRA contends that the brokerage firm failed to due enough due diligence on the Madoff feeder fund, and was “grossly negligent.”

The Lieberman, who are accusing the Regions Financial unit of fraudulent misrepresentation, negligence breach of fiduciary duty, and violations of Florida and Tennessee statutes, claim that Morgan Keegan and Julio Almeyda, one of its registered representatives, invested $200,000 of their money with Greenwich Sentry. The fund ended up filing for bankruptcy last November.

Per Morgan Keegan’s internal compliance rules, investors should only be allowed to place money in hedge funds if “speculation” is one among their main objectives when opening an account. “Speculation” was the last objective on the couple’s list. FINRA says that not only must the broker-dealer repay the couple’s entire loss of $200,000, but also they must also give them 6% annual interest from when the investment was made, $50,000 in punitive damages, and $14,000 in expert witness fees.

Meantime, the FINRA panel cleared Almeyda of wrongdoing, finding that he did not know that Morgan Keegan had not provided sufficient due diligence nor was he aware that he had given the Lieberman’s false and misleading information about their investments’ risks.

Over the last year, Morgan Keegan has found itself dealing with hundreds of arbitration cases nvolving mutual fund investors alleging securities fraud related to the significant losses they sustained during the subprime mortgage crisis.

Related Web Resources:
Morgan Keegan Fined $250,000 Over Madoff Fund, Money News, March 7, 2011
Investors Succeed in Due Diligence Case Against Brokerage Over Madoff-Related Losses, BNA Securities, March 9, 2011

More Blog Posts:
Morgan Keegan to Pay $9.2M to Investors in Texas Securities Fraud Case Involving Risky Bond Funds, Stockbroker Fraud Blog, October 6, 2010
Morgan Keegan & Co., Inc., Morgan Asset Management, and Two Employees Face Subprime Mortgage Securities Fraud Charges by SEC, Stockbroker Fraud Blog, April 8, 2010
Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses, Stockbroker Fraud Blog, February 23, 2010 Continue reading

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
Continue reading

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.

The Financial Industry Regulatory Authority has had to bring in hundreds of additional arbitrators to deal with the approximately 400 securities fraud claims that investors have filed against Regions Financial Corp., the investment banking unit of Morgan Keegan & Co. Investors are seeking to recover $35 million after three of its mutual funds dropped in value by up to 82% when the housing market fell apart. The Region Financial Corp mutual funds contained subprime-related securities, including collateralized debt obligations, low-quality mortgages, and mortgage-backed securities.

Morgan Keegan claims that it notified investors of the risks associated with investing in the mutual funds. Regions says that to date, 79 arbitration cases have been heard. 39 of the cases were dismissed and 114 arbitration claims seeking $24 million were dropped before decisions were reached. The investment firm is putting up a tough fight against the complaints. So far, arbitrators have been awarded $7.6 million.

Because so many investors filed arbitration claims, FINRA has had to contact arbitrators in different parts of the US and ask them to come to the different cities where the hearings on the mutual funds are talking place. The average pool of arbitrators in each city is now approximately 721 persons. This is an increase from its previous average pool of 87 arbitrators.

Last week, the Staff of the Atlanta Regional Office of the US Securities and Exchange Commission sent Morgan Keegan & Co, Inc., Morgan Asset Management, Inc., and three employees a “Wells” notice. The notice stated the Staff’s intention to recommend that the Commission bring enforcement actions over possible federal securities laws violations. Morgan Keegan, is a subsidiary of Regions Financial Corporation.

The Staff had been investigating a number of mutual funds that Morgan Asset Management had previously managed. In light of the Wells notice, the securities fraud law firm of Shepherd Smith Edwards & Kantas LTD LLP is continuing to file arbitration claims against Morgan Keegan for covering up the risks associated with their bond funds.

Our investor clients are accusing Morgan Keegan of selling specific funds that it promoted as relatively conservative investments when in fact, the funds were exposed to subprime mortgage securities, collateral debt obligations, and other high risk debt instruments. Investors are alleging that Morgan Keegan took part in a scam that defrauded investors of certain bond funds while misrepresenting their degree of involvement in more high risk investments. As a result, our investor clients suffered major financial losses after the subprime mortgage market collapsed.

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