Last month, brokerage firm Morgan Keegan made an undisclosed payment to the Indiana Children’s Wish Fund to settle an arbitration dispute. The wish granting organization had lost $48,000 in a mutual fund that was heavily invested in mortgage securities.
The Indiana Children’s Wish Fund has about $1 million in assets. The Wish Fund was founded by Richard Culley, a blind attorney, in 1984. The charity has granted some 1800 wishes to children who have been diagnosed with life-threatening illnesses. If the charity had not received its settlement sum, it would not have been able to realize the wishes of nine children.
Last June, a banker at Regions Bank in Indiana recommended that the Wish Fund invest money in a bond that Morgan Keegan offered. Regions Bank and Morgan Keegan are affiliated with one another. Terry Ceaser-Hudson, the Wish Fund’s executive director, says that the Morgan Keegan broker told her that the fund was very safe.
The Wish Fund placed nearly $223,000 into the fund on June 26. A little over two weeks later, Ceaser-Hudson received the Wish Fund’s first brokerage statement. The wish granting organization lost $5,000 within the first few days of making its investment. In September, Ceaser-Hudson sold the charity’s stake in the Morgan Keegan fund and received $174,000 back-a 22% loss over 3 months.
Ceaser-Hudson filed an arbitration claim against Morgan Keegan in November. She cited the unsuitable recommendation, saying the broker had breached his duty to the Wish Fund. By the end of December, the Morgan Keegan fund was down nearly 50% from its $1 billion in assets that it reported in March.
Overall, the mortgage securities market debacle has cost more than $100 billion in losses and write-offs, as well as eliminated billions of dollars in stock market value. Fortune 500 CEO’s have been fired over the crisis and some of the country’s leading credit rating agencies have lost their credibility. Many investors may still be unaware of the damage that the mortgage securities collapse has wreaked upon them-but all of this will eventually be revealed.
The stockbroker fraud law firm of Shepherd Smith and Edwards is dedicated to helping investors who have lost money because a broker was careless or engaged in broker misconduct and breached his or her duty to a client. Please contact Shepherd Smith and Edwards today and ask for your free consultation with one of our stockbroker fraud attorneys.
The Debt Crisis, Where It’s Least Expected, New York Times, January 4, 2008
Indiana children’s charity sues Morgan Keegan fund over alleged subprime investment, The Birmingham News, November 29, 2007
Indiana Children’s Wish Fund