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